On Tuesday, the Turkish Lira rebounds after a record fall on Monday. At around 6:00 am UTC, the Turkish currency traded at 11.11/USD. Turkish President Tayyip Erdogan’s new economic laws have left the currency volatile, and it had fallen to around 18 per USD on Monday as a result of the same.
After rallying nearly 50% this week, the Turkish Lira swung back again because the investors considered the sustainability of the Erdogan government measures to bring up the currency.
Unlike the usual Forex trends, the Turkish Lira swung wildly, falling 7% and rising by around 20% against the USD. This up-and-down swing has made the currency the world’s most volatile currency as of now.
At the time of writing the article, the Turkish Lira is at 12.775 against the USD, down 2.60% for the day.
Earlier on Monday, the currency had rocketed with its biggest rally since 1983 after the President announced that the Government is planning measures to introduce a program to protect savings from Lira’s fluctuations.
The convolutions in Lira have made the USDTRY pair volatility to around 50%, leaving behind the levels during the currency crisis of 2018.
President Tayyip Erdogan quoted the Islamic usury doctrine and stated that the measures would decrease the interest rate.
Under Erdogan’s pressure, the central bank had cut key interest rates from 19 to 15 percent in September, causing the Turkish currency to plummet. It has further reduced interest rates from 15% to 14%.
Erdogan defended his policy on Sunday, saying that the currency volatility should be seen as an attack on the country’s economy. He also reassured that the inflation rates crossed the 20% mark would soon slide back under ten.
The Turkish Government is intended to mitigate the retail investors’ demands for dollars and bring an end to this currency crisis that has been troubling the country since September. The sustainability of the measures being undertaken and the reaction of the local investors are to be looked out for.
The investors’ concerns were visible from Turkey’s five-year credit default swap, which fell by 35 points, still hovering around the highest level of more than a year ago.
According to a Bloomberg report, a current strategist at Wells Fargo, Brendan McKenna, said this policy could help the currency. Still, it mainly comes down to credibility and whether the depositors believe it is an implementable policy.
Forex traders tweeted their views about this volatility of the Turkish Lira.
The volatility of the USDTRY pair has made investors compare its charts to Bitcoin, cryptocurrencies, and other meme stocks.
The recovery is expected to be stable, but nothing can be predicted.