Erdoğan says Turkish lira will stabilise as losses reverse

Turkish President Recep Tayyip Erdoğan said he expected the lira to stabilise against major currencies after it fell to an all-time low.

The value of the currency can go up and down and its losses over the past few days were temporary, Erdoğan told reporters in televised remarks on Friday.

The Turkish lira plummeted to a record low of 7.3677 per dollar earlier in the day. It reversed those losses as Erdoğan spoke, trading up 0.6 percent at 7.19 per dollar by mid-afternoon in Istanbul.

Erdoğan said steps taken by the central bank and other state-run bodies would arrest the lira’s decline.

“These are things that come and go,” he said, referring to the selling pressure on the currency.

Turkey’s central bank and state-run banks have spent tens of billions of dollars this year defending the lira as foreign investors and local deposit holders switched out of the currency. The lira has lost almost 20 percent of its value since January.

The central bank said on Friday it was halving extra lira funding provided to major local banks, in place since the outbreak of the COVID-19 pandemic. On Thursday, the bank said it was willing to use whatever means necessary to stem market volatility.

But investors say the measures the central bank can take may not include interest rate hikes. Erdoğan says interest rates are inflationary and sacked and replaced the central bank’s governor last July for failing to lower borrowing costs.

Mustafa Varank, Turkey’s Industry and Technology Minister and a former Erdoğan adviser, said there were people rubbing their hands in anticipation of Turkey’s economy falling into bankruptcy.

Erdoğan has increased his grip on economic decision-making since winning a new term as president with vastly enhanced powers at elections in June 2018. He appointed his son-in-law Berat Albayrak to head a merged Treasury and Finance Ministry in July of the same year.

In August 2018, the country suffered a currency crisis, partly caused by so-called “economic overheating” brought on by government stimulus.