Turkey adjusts New deposit tool to ease Lira dip

Turkey has slightly altered the price-fixing method that was utilized to calculate the lira-protected deposits’ returns. The move came in less than two weeks post President Recep Tayyip Erdogan’s announcement about the new instrument as part of a plan in order to shape up the dipping currency.

Central Bank’s new issued guidelines state that the conversion rate will be set on the basis of foreign-exchange buying rates which will be announced about six times a day instead of just once a day. The rate is incorporated to ascertain lira’s performance against other major currencies.

Turkish lira has lost 3.55% yet again. It was priced at 13.55 per USD at 9:38 a.m. ET today. The USD/TRY currency pair has become the most volatile of its kind.

Earlier, the currency pair had hit record lows on December 20, 2021. Moreover, the week after it lost around 3.42% as 1 USD was equal to 11.5 TRY at 8:28 a.m. ET. The currency has slumped around 35% compared to a year-ago figure. Though the dip is significant, it is still better than the 8% decline last week.

The pair was oscillating between gains and losses on Monday morning. Earlier, it succumbed to 11.00 few hours ago. Moreover, it lost significant value thereafter. 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.

President Erdogan’s Move

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.

The volatility of the USD/TRY pair has made investors compare its charts to Bitcoin, cryptocurrencies, and other meme stocks.

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