The Turkish lira erased partial gains from last week to reach 5.5727 against the US dollar earlier today after President Erdogan told banks they would “pay a heavy price” for buying foreign currency on the expectation that the lira will fall. As of 02:15PM UK time, the lira is currently worth 5.6057, bouncing back by around 2 percent today. It comes after the Turkish currency plunged as much as 5 percent in the previous session, weakening as far as 5.8490 against the US currency and marking its biggest one-day fall since a currency crisis took hold in August 2018. Central bank data showed on Thursday that forex deposits and funds including precious metals held by Turkish locals hit a record high in the week to March 15, which economists said signaled a fall in confidence in the lira.

But the lira managed to claw back losses today after the speech from President Erdogan in Istanbul, during which he accused “some people” of attempting to make the lira decline against foreign currencies with their cooperators in Turkey.

Speaking days before Turkey goes to the polls on 31 March for local elections, he said: “I am calling on those who engage in such activities on the eve of elections, we know all of your identities. We know what all of you are doing.

“Know this, after the elections, we will present you with a heavy bill.”

President Erdogan did not specify who his comments were aimed at.

His comments come after the Banking and Regulation Supervision Agency in Turkey said over the weekend it was investigating US investment bank JP Morgan, accusing the lender of advising clients to short the lira.

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Per Hammarlund, chief EM strategist, SEB, said: “The recent statement from the central bank was better than 2018 but its still lacking a more stronger action.

“The banking regulator needs to be more clear on what they will do with bad loans, the non-performing loans in the economy.”

The lira lost nearly 30 percent against the US dollar last year off the back of concerns surrounding the central bank’s ability to curb inflation following calls from President Tayyip Erdogan for lower borrowing costs.

That sell-off, which tipped the economy into recession in the fourth quarter, was exacerbated by strained ties between Ankara and Washington over the trial of a US evangelical pastor in Turkey.

Since the crisis, foreign exchange held by Turkish local individuals has edged higher and hit a record in the week to 15 March, data from the central bank showed, signalling aversion to the local currency.

The tumble on Friday came following comments from President Erdogan about US President Donald Trump’s move to recognise Israeli sovereignty over the disputed Golan Heights area.

President Erdogan claimed the statement from Mr Trump had brought the region to the brink of a new crisis.

But his comments had a knock-on effect on the economy as it revived worries about a possible worsening of ties between the NATO allies.



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