The Turkish lira experienced its strongest rebound of the year on Monday, following the announcement of a new support measure requiring some banks to sell off their foreign exchange reserves.
The Banking Sector Regulation and Supervision Agency (BDDK) announced this measure on Friday evening, following the markets closed, in order to support the Turkish lira.
The currency, which was trading Friday followingnoon at nearly 17.4 pounds to the dollar, rebounded around 16.7 pounds to the greenback on Monday shortly following 11:00 GMT.
The Turkish lira, which traded at 16.1 pounds to the dollar earlier on Monday, has lost 47.5% of its value once morest the dollar over the past 12 months as a result of President Recep Tayyip’s much-maligned monetary policy Erdoğan.
At the request of the Head of State, the Turkish Central Bank has persisted for nearly a year in lowering or maintaining its main key rate, despite constantly accelerating inflation.
Contrary to classical economic theories, President Erdogan believes that high interest rates promote inflation.
This reached 73.5% over twelve months in May, according to the Turkish Statistical Institute. But the official figures are questioned by many Turkish and foreign economists, who for some calculate this rate at more than 160%.
The measure announced by Turkey’s banking regulator on Friday requires banks with more than 15 million Turkish liras (regarding $900,000) in foreign currency – if that amount represents more than 10% of their assets or annual sales – to sell their reserves in dollars and euros before being able to issue new loans.
/ATS
