Turkish Minister Concedes Lira Rally Decimated Small Investors
The Turkish lira’s unprecedented rally early this week caught recent buyers of foreign currencies unawares.
(Bloomberg) -- The Turkish lira’s unprecedented rally early this week caught recent buyers of foreign currencies unawares, and the government acknowledged those harmed most were small investors.
Foreign currencies were still being purchased “when the lira dropped to 15, 16, 17 per dollar,” Treasury & Finance Minister Nureddin Nebati said in a live interview with local broadcaster NTV late Thursday.
“Who were these buyers? Surely, not big financiers. Any financier in his right mind would know things would revert some way in Turkey,” he said. “So, who got burned? Small investors, as always. Now they are brooding over their losses.”
The lira regained some of its heavy losses in a few hours late Monday, with a trough-to-peak movement of 33%, as President Recep Tayyip Erdogan introduced a new deposit tool that protects savers against currency depreciation.
The lira continued to strengthen through the week, wiping out savings of those who had piled into dollars and euros in an effort to protect their purchasing power.
Foreign currency deposits of Turks rose a net $5.4 billion in the week to Dec. 17, the final week of the lira rout, official data published on Thursday showed. The lira closed at 16.41 per dollar on Dec. 17, tumbling to a record low of 18.3633 on Monday, before Erdogan spoke.
“We warned them, saying it was a bubble,” Nebati said during Thursday’s interview, referring to Turkish citizens. “We told them numerous times not to buy into it.”
The minister, who was appointed by Erdogan in early December, seemed to acknowledge there was government intervention in the market to prop up the lira.
Responding to a question on whether state institutions were selling foreign currencies, he said: “Does Turkey lack the power to use all the instruments it has at hand? It can use any instrument it needs.”
Despite this week’s gains the lira is still 26% weaker from Sept. 23, when the central bank, urged on by Erdogan, started cutting interest rates. It remains the worst performer among emerging market currencies against the dollar this year, with a slump of 37%.
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