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Investing.com – Days later, Turkish President Recep Tayyip Erdogan called on Turks to convert their holdings of foreign currency and gold into local currency through financial institutions.
“This hijacking represents a strategy that will benefit them and the country,” said the Turkish president.
It looks like there were even more, as markets weren’t bracing for another blow that plunged the defeated Turkish Lira, which had lost a lot in recent days.
Erdogan’s appeal to the Turks came after the change of central bank governor caused the lira to fall by around 12% in a week.
A few minutes ago, the vice-governor of the Turkish Central Bank, Murat Cetinkaya, was removed from his post, according to a presidential decree published in the Official Gazette today, Tuesday.
The decree stated that Mustafa Douman had been appointed deputy governor of the central bank. The decree did not mention the reason for the change or any additional details.
On March 20, President Recep Tayyip Erdogan decided to dismiss the bank’s former governor, Naji Iqbal, and appointed Shihab Koçioglu to replace him.
In his speech last week at a meeting of the ruling Justice and Development Party (AKP), Erdogan said the Turks should turn their currencies and gold into lira-denominated financial instruments.
And in a surprising decision, Turkish President Recep Tayyip Erdogan sacked Turkish Central Bank Governor Naji Iqbal after just 5 months in office after raising the interest rate.
For the third time in less than two years, Erdogan has sacked the governor of his central bank over credit easing disputes.
Iqbal was at the start of the process of restoring the confidence of international institutions that Turkey abandoned controversial policies that drove the Turkish lira to an all-time high and made it the worst performing emerging currency.
Last year Erdogan sacked the central bank governor, coinciding with the resignation of his son-in-law, the finance minister, which resulted in the lira’s resignation and pushed her to record levels.
The new governor said any interest rate cut would take place on April 15, meaning there would be no urgency for the markets, which could calm investors slightly.
Deutsche Bank (DE 🙂 estimates that the foreign inflows that moved Turkish stocks last week would likely be around $ 750 million to $ 1 billion, with the outflow between $ 500 million and $ 700 million in bonds. national standards of the country.
Christian Maggio of TD Securities said the Turkish lira would initially lose 5% of its value.
This could be followed by a drop of 10% to 15% in the coming days, the announcement highlighting the recklessness of Turkey’s monetary policy decisions, especially with regard to monetary affairs.
“Kawege represents the risk of” pro-growth monetary policies now, and an accommodating policy that is not applied in any other country, “added Maggio.
The Turkish lira is trading during these times at low levels against the dollar and fell to 8.32 pounds against the dollar, approaching its all-time lows last October, when it fell to 8.52.
The lira suffered steep losses at the end of October 2020, reaching record levels against the dollar, the lowest on record, after monetary policies of the Turkish Central Bank failed to stop the bleeding of the national currency , so the dollar broke a new high, and hit its highest level ever at 8.3768.
A march in 2020 was fraught with losses, with the lira registering 5.95 against the dollar in January and continuing to decline in February, to 5.98 against the dollar.
In March, the pound fell sharply, registering 6.17 per dollar, and in April, the pound fell to 6.70 per dollar.
In May, the lira registered 7.01 against the dollar, and in June, the lira registered 6.80 against the dollar, and it continued to decline in July to 6.84 against the dollar, until reach record levels in October.
On an annual basis, it has collapsed dramatically in recent years, with the dollar registering around 2.92 pounds in January 2016 and in 2017 it registered 3.52 pounds, and the dollar rose in January. 2018 to 3.80 pounds, and in January 2019 the dollar jumped. at 5.33 pounds, and the green currency was registered in January 2020 at about 5.97 lira.
Geoffrey Haley, chief market analyst at foreign exchange firm Oanda, believes Turkish President Erdogan has a special system of economic policy, which Jeffrey called “Ardomix”.
Jeffrey told the BBC: “The basic premise of Erdogan’s economic system is that high interest rates lead to high inflation rates, and it’s a theory that contradicts the principles of economics everywhere. “
Rising interest rates increase the cost of borrowing, preventing consumers from overspending and, in turn, encouraging savings.
As for low interest rates, this usually leads to slower economic growth.
According to Geoffrey Haley, Aghbal’s monetary policies were widely appreciated as they aimed to achieve a stable state of inflation.
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