The lira fell over 8% versus the dollar on Monday, as investors fretted about Turkey’s monetary policy following a week of massive state-backed market interventions.
Last week, the government-backed the lira by covering FX losses on certain deposits.
It fell to 11.6 versus the dollar on Monday before recovering to 11.35 at 0800 GMT.
Support levels are 10.57 and 10.25, according to QNB Invest’s daily newsletter.
The Turkish lira rose to mid-November levels last week. Fears of spiralling inflation caused by President Tayyip Erdogan’s series of interest rate decreases had driven it down to 18.4 per dollar last Monday.
The currency is still 35% lower than at the end of last year.
Erdogan said late Monday that the Treasury and central bank will repay losses on foreign currency deposits converted into lira, spurring the lira’s largest intraday rise.
According to official statistics, Turks did not sell dollars in substantial amounts on Monday and Tuesday last week, contributing little to the gains. Traders estimate that state actions cost the central bank around $8 billion last week.
On Dec. 2-3, the central bank sold $1.35 billion in direct FX interventions to strengthen the lira around 13.5 per dollar.
Erdogan told AHaber that after the anti-dollarisation strategy was announced, deposits surged by 23.8 billion lira.
However, the BDDK statistics indicated that after a week of high dollar accumulation, Turkish individual depositors had $163.7 billion on Tuesday, almost unchanged from Monday and Friday.
Last week, the lira benefited from what traders and analysts dubbed state bank dollar sales backed by the central bank.
Since September, amid rising inflation of above 21%, the central bank has cut policy rates by 500 basis points to 14%. Economists forecast a 30% increase in prices next year owing to the weakening of the Turkish Lira.
On Monday, the BIST 100 index jumped 2.6%.