The Turkish pound kept part of yesterday’s gains

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The Turkish pound stabilized and maintained gains from the -so-best week in two decades, as the currency returned from the low, following the Turkish president’s new plan to protect Turkish savings amid such instability.

The pound traded at 12.25 against the dollar, up from almost 12.4 pounds on Tuesday, when it had risen 6% in a session with repeated fluctuations.

On Monday, when the president announced the plan to protect pound deposits from further devaluation, the pound sank 10%, then marked the largest increase ever recorded in a single day, with volatility hitting “red”.

The currency is still losing 40% of its value this year after the crash caused by Erdogan’s aggressive monetary easing policy.

At its lows on Monday, the currency lost 60% since the beginning of the year.

More than half of locals’ savings are in foreign currency and gold, according to central bank data, with confidence in the pound eroding after years of devaluation and after the central bank’s damaged credibility.

Erdogan introduced a series of measures Monday that would lighten the weight of a weakened currency and encourage Turks to hold pounds instead of dollars.

Analysts and bankers warned that if the pound’s rally were reversed and the government was forced to make up for depositors’ losses, inflation could rise further and significantly affect the deficit.

JP Morgan even estimates that a possible fall of 12% of the pound in relation to the deposit interest rate, could increase the budget deficit by about 1% of GDP over a six-month horizon.

Turkey’s central bank said yesterday it would support the conversion of foreign currency deposits into pounds, to further encourage the reverse dollarization.

The government may have hailed the pound recovery as a major political victory, but economists have widely said Erdogan’s low interest rate model is reckless and expects inflation to rise from 30% to 30%. next year.

Source: Capital.gr

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