Lira rallies late after Erdogan props up currency

Turkey’s lira ended the session up over 20% on Monday after President Tayyip Erdogan introduced a series of steps that he said will ease the burden of the weakened currency on Turks, while vowing to press on with a low-rates policy that led to the lira’s slide in the first place.

The lira , which was down more than 10% at 18.4 to the dollar earlier, strengthened sharply and ended up 25% on the day at 13.15 in reaction to Erdogan’s announcement, in its largest daily trading range on record. It remains down 45% so far this year.

Around $1 billion was sold in markets after Erdogan unveiled the measures, the head of the Turkish Banks Association said.

“I imagine the market was very short the lira and the measures announced by Erdogan to protect domestic investors’ savings from lira fluctuations provided some impetus to cover those shorts,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

Speaking after a Cabinet meeting, Erdogan said the measures would ensure citizens would not have to convert their lira into foreign currency over the lira crash, including a deposit guarantee promise.

“We are presenting a new financial alternative to citizens who want to alleviate their concerns stemming from the rise in exchange rates when they evaluate their savings,” Erdogan said.