The Turkish lira’s (YTL) overnight swap rate plunged to 50 from a crippling 1200 percent in 24 hours.
The currency broke an 18-year record in the London swap market on Wednesday night.
The overnight rate stood at 24 percent last week, Refinitiv Eikon data showed.
Turkish financial markets surprised following the Central Bank of the Republic of Turkey’s (CBRT) decision to limit the Turkish lira trade in the overseas markets to recover the currency’s losses as it continues weakening against the US Dollar.
On Monday the CBRT decided to squeeze over the counter lira trade by increasing the swap sale limit to 20 percent from 10 percent for transactions that have not matured, and the rate increased 30 percent, Daily Sabah reported earlier.
“The last swap step taken by the Central Bank to buy foreign currency spot is strengthening foreign exchange reserves, allow the market to meet Lira liquidity and relief the economy,” said Durmus Yilmaz, the former chairman of the CBRT and opposition Good Party’s Deputy President responsible for Economic affairs in an interview with Turkish T24 news portal.
USD/YTL exchange rate performed the highest at 5.6850 level on the first day of the week, declining to 5.30 on Wednesday, but it was recorded at 5.4206 at midnight.
The lira continued to drop against the dollar and the exchange rate reached more than 5.60 yesterday.
The currency traded at 5.5830, an increase of 4.60 percent at 11:18 today. At the same time, Euro/YTL traded at 6.3440 with 4.10 percent premium. The dollar index rose by 0.26 percent to 97.030.
Speaking to state-owned Anadolu News Agency, Central Bank Governor Murat Cetinkaya said on Thursday that the bank continued to strengthen its reserves “decisively and the total reserves last week increased by $4.3 billion to $96.7 billion as of March 27.”
Cetinkaya said net reserves rose $2.4 billion to $28.6 billion in the same period.
Economists analysis say that the lira continues to lose against the dollar as Turkey needs to roll over $177 billion of foreign-currency debt due within the next 12 months and President Erdogan is pressuring the central bank to cut interest rates.