The Turkish lira rebounded, recouping losses after its worst day since a crash last year as the central bank reiterated its pledge to maintain price stability and said that it was determined to accumulate reserves.
Policymakers are probably seeking to end speculation that the Central Bank of Turkey was using its stockpile to support the currency before the March 31 elections. The currency advanced 3.4 percent in early trading, which can be volatile due to low liquidity.
The banks statement follows a surprise tightening of monetary policy on Friday last week and a statement from a bank official that said the drop in official reserves was not anything out of the ordinary.
Officials started a probe into JPMorgan Chase & Co and other banks for stoking the lira’s drop.
The currency’s one-week implied volatility extended its advance yesterday to the highest level since October last year. Its jump on Friday was the biggest since 2004.
Last week’s meltdown comes after local investors accumulated about US$25 billion of hard currency since September last year, a hedge against runaway inflation and uncertainty over the direction that policy would take after the elections.
Bankers deemed responsible for speculating against the currency would be punished, Turkish President Recep Tayyip Erdogan said on Sunday.
“If you are soaking up foreign currencies from the market and engaging in provocative actions,” there will be “a heavy price for that,” Erdogan said in televised remarks during an election rally in Istanbul.
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