Lira slides nearly 8% amid investors' concern over policy actions

The lira tumbled almost 8 per cent against the dollar on Monday amid persisting investor concern over Turkey’s monetary policy, having surged more than 50 per cent last week after billions of dollars of state-backed market interventions.

The lira was also supported last week by a government move to cover FX losses on certain deposits. Under pressure from President Tayyip Erdogan, the central bank has slashed its policy rates by 500 basis points to 14 per cent since September.

It weakened to as low as 11.6 against the greenback on Monday before trimming losses to trade at 11.35 by 0800 GMT. “The main exchange rate resistance is at 11.45 and 12.0, with support levels of 10.57 and 10.25,” QNB Invest said in a daily bulletin.

Last week’s rally brought the Turkish currency back to mid-November levels. Last Monday, it had plunged to an all-time low of 18.4 per dollar, after a months-long slide due to fears of spiralling inflation driven by a succession of interest rate cuts engineered by Erdogan.

At current levels the currency is still 35 per cent weaker than at the end of last year. Erdogan unveiled late last Monday a scheme under which the Treasury and central bank would reimburse losses on converted lira deposits against foreign currencies, sparking the lira’s biggest intraday rally.

State interventions cost the central bank more than $8 billion last week.