Turkey investors are said to be undermining President Erdogan’s plan to support the Lira without raising interest rates. They are holding on to their foreign currencies with companies boosting their FX holdings by ~$1.6bn in the week ending December 24. Total foreign-currency deposits rose to a record $239bn although households trimmed cut their deposits by over $100mn. “The reason why people accumulated foreign-currency up until today was distrust, and the trust issue is still there,” said Evren Kirikoglu, a strategist in Istanbul. In December, Erdogan announced extraordinary measures to bolster the Lira that included the introduction of a new program. The new program indicated that the government will make up for losses incurred by holders of lira deposits should the lira’s declines against hard currencies exceed interest rates promised by banks. The Lira was down over 70% in 2021, the worst performing currency.

Turkey’s dollar bonds were trading stable with its 5.125% 2026s at 96.27, yielding 6.1%.

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