In a late Monday speech, Erdogan unveiled a plan he said would guarantee local currency deposits against market fluctuations. Erdogan said the series of steps will ease burdens from a currency crash over the last few weeks and encourage Turks to hold lira savings rather than dollars.
We then heard from the Turkish bank association head who stated around $1 billion were sold in markets after Erdogan announced economic measures. According to the calculations of three bankers, around $1-1.5 billion in savings were converted to lira on Monday night.
The lira went gang-busters, with some economists saying the new measures are effectively veiled rate hikes that may not ultimately stem the selling pressure while straining the back-stopping Treasury.
Lira has strengthened 9% vs USD this morning, following a historic 25% recovery from record lows
I just can't see this move in the Lira lasting, and I also can't imagine Erdogan is willing to keep selling his USD reserves.
IMO the trade is to fade this move, though, given the swings, you'd only want to be trading the smallest of size.
