Turkish lira steadies after tumbling 44% in tumultuous 2021

Source:Financial Times Date:28Jan2022

Laure Pitel has done an excellent job of tracking the developments that led to the stabilization of Turkish Lira. Her interviewees suspect CB intervention, albeit at a modest scale.  I agree, there isd less FX demand, as most of the financial welath has been redistributed after the inflatin shocks.  CB of Turkey is only intervening to “sterilize” new savings flowing  into FX.

Uptake of the savings scheme could yet be bolstered by companies, which were invited to join on January 11 and have been offered a tax incentive to take part. Paradoxically, however, overenthusiastic signing-up would deepen concerns about the cost of the mechanism to the state, which will foot the bill for any exchange rate losses. While Turkish officials have hailed the scheme as a triumph, some analysts believe that the lira’s central bank is still spending the country’s foreign currency reserves on supporting the lira, albeit at a less intense pace than in December, when it burnt through at least $7bn.