Turkey’s currency booms over Erdogan’s disclosure of the country’s currency

Turkish Lira participated in the second day of the protests President Recep Tayyip Erdogan unveiled a new savings plan which experts described as a rise in interest rates that could hurt people’s finances.

Tuesday’s profits leave the fund to rise almost 50 percent from the decline in the old trading sector.

Significant instability began with Erdogan’s new plan to lure Turkish rescuers out of the dollar and gold in exchange for losses if they kept their money in lira.

The currency recently traded around TL12.6 against the US dollar, falling sharply at TL18.4 before Monday’s dramatic change. Monday’s edition was the largest of Refinitiv’s writings since the early 1990s.

Refet Gurkaynak, a professor of economics at Bilkent University of Ankara, described the new policy as “a sharp rise in interest rates”. He also said it could bring financial stability but warned that it could also be “dangerous”.

This was echoed by Wolfango Piccoli, a Turkish expert on Teneo technology, who said the move was a “price hike” – and one that could be justified by the exchange.

“The sharp rise in interest rates means that taxpayers will have to pay more for the rich in order to avoid losses. [foreign exchange] in the future, ”he wrote in a letter to clients, adding that the scheme would put almost all of the funds at risk by the government.

Erdogan, a staunch opponent of rising interest rates, has ordered that prices fall sharply in recent months and even double the price hike.

Although the Turkish president said that his “new economic model” would boost trade, finance and job creation, it has made the Turkish lira even more difficult. The currency lost about 50 percent of its value against the dollar three months before Erdogan announced it.

The influx of foreign currency from Turkey in recent years means that the lira coercion is mainly driven by Turkish citizens and traders.

Not wanting to save money in the lira, whose value has been broken by rising inflation and real interest rates, they have flocked to the dollar and gold. This has made the investment very difficult.

To address the problem of “dollarization”, Erdogan announced late Monday that his government would offer “another new economic means to citizens” which he said would reduce their concerns over the impact of the falling lira on their savings.

The government will provide compensation, he said, for any losses such as a decrease in interest rates beyond the interest rate offered by banks.

“From now on, there will be no need for our citizens to change the money they have saved from lira to foreign currency because they are worried that the currency could go up,” the Turkish president said.

The Turkish Treasury government has said the system will be open to individuals, not businesses, and will have to commit to closing their funds for three months in order to benefit from the guarantee of exchange.

While it did not specify in detail how the project will benefit, experts are concerned that the Turkish Treasury will be at risk of paying investors any lost money.

Although Turkish public finances remain strong compared to many other markets to come, the share of foreign central government loans reached 60 percent of the October figure, up from 39 percent in 2017. That is, at any given time. lira has exceeded the dollar, it has become too expensive for the government to meet its debts.

Citigroup said that, according to the Treasury office, the new policy “could be more costly than a down payment plan if the lira prices fail to fall and thus disrupt the performance.”

“We hope this will bring some relief as the government tries to improve its new fiscal policy,” said Luis Costa, a financial analyst at Citi, adding that the bank is rejecting the idea that betting is down.

However, the conspiracy will not deter Turkish rescuers from searching for unsafe items as a fence against rising prices, he added. “We do not see how it will address the economic crisis in Turkey that comes from [currency-led] inflation, ”Costa said.