The Turkish president applauded the steps taken to help depositors, as Reuters stabilized as the lira stabilized

By Ece Toksabay and Tuvan Gumrukcu

ANKARA (Reuters) – Measures to protect Turkish lira’s bank deposits from amortization amid the currency crisis have been achieved, President Tayyip Erdogan said on Wednesday as the lira stabilized this week following a volatile rebound in record lows.

The pound was 0.6% weaker at 12.48 against the dollar at 1122 GMT after a strong strengthening on Monday and Tuesday, although the currency fell about 40% this year after an aggressive burnout designed by the president.

Before Erdogan announced his plan to protect lira deposits from further amortization on Monday, the currency fell to a low of $ 18.40. He then engaged in an aggressive trade.

The new measures move the burden of a weakened currency to the Treasury and encourage Turks to hold lira deposits after many Turks have saved their dollars in dollars.

“The program we announced to bring the exchange rate to a reasonable level within the rules of the free market has achieved its goal,” Erdogan told his ruling AK Party lawmakers as he again defended the push for lower interest rates.

“Some people came out yesterday, saying ‘now is the time to buy a currency, this will continue from where it left off (the currency crutch)’. They have watered their brains,” he added.

More than half of Turkey’s savings are in foreign currency and gold, with data from the central bank showing that the lira’s confidence is eroding as a result of years of amortization and the credibility of central banks.

COST INCREASE

The government’s commitment to cover the loss of deposits in the event of further lira repayments means that any weakening could spark inflation and raise the budget deficit, bankers and analysts say.

JPMorgan (NYSE 🙂 said the deficit would rise by 1% of gross domestic product if it weakened by 12% in six months.

The central bank said on Tuesday it would allow foreign currency deposit accounts to be converted into lira.

Under pressure from Erdogan, the central bank has cut rates by 500 points since September. The president has pledged to continue his low-rate policy, and opposition parties have called for an immediate election due to the disappearance of foreign exchange.

The government said Monday’s rebound would be a policy gain, but economists say Erdogan’s low-rate model is irresponsible and inflation will reach 30% next year, above 21%.

The central bank has said it has intervened directly in the markets five times this month to support the pound. On Wednesday, it said it had sold $ 844 million in its first December 1 intervention.

Erdogan said on Wednesday that he would not allow citizens to “suppress” rising inflation and interest rates, and reiterated that he would not return to his policy.

“We know what we’re doing, why we’re doing it, how we’re going to do it, where we’re going and where we’re going to get to,” he said.

With the crash of the lira, the number of cryptocurrency exchanges in Turkey rose by more than one million to close to 500,000, data shared with Reuters showed.