The Turkish lira fluctuated sharply near a new record low on Wednesday as the central bank said it had intervened due to “unhealthy” market prices, while President Tayyip Erdogan again doubled down on his pre-election strategy of sharp rate cuts.
The volatile trade in low liquidity came after the emerging market currency logged its second-worst month ever in November, hammered by Erdogan’s endorsement of sharp monetary easing despite soaring inflation and widespread criticism.
The central bank – which Erdogan has overhauled and pressured this year – said in a statement it “directly” intervened in the market “via selling transactions due to unhealthy price formations in exchange rates”.
The lira , which had earlier weakened as far as 13.87 to the U.S. currency, rebounded as far as 12.42 – a rally of more than 8% on the day. However, by 1256 GMT, it was just 0.5% firmer at 13.35.
“We have no doubt that [central bank] intervention will fail if the intention is to stabilize the currency, though it could provide some more two-way risk in the near term. In fact, the move worries us even more,” said Brown Brothers Harriman.
“Spending precious FX reserves suggests that the government is still holding the line in its economic policies, making the adjustment even more painful,” it said.