By Aysu Bicer
ANKARA (AA) - The Turkish lira made an overnight comeback on Monday as the country's president revealed a new financial mechanism to shore up the currency.
The fresh measures come in the wake of rising prices and exchange rates as the government pursues its "new economic model," which emphasizes opposition to high interest.
President Recep Tayyip Erdogan said the new instrument would allow potential investors in foreign currencies to get the same results while sticking to the lira.
On Tuesday morning, the lira/dollar exchange rate dropped to 11.2248 as of 9.30 local time (0630GMT) and then below the level of 7.9, gaining almost 40% against dollar since Monday evening.
- Insane day
Timothy Ash, a senior emerging-market strategist at the London-based BlueBay Asset Management, also commented on the "insane" comeback.
"Absolutely insane day in Turkish FX today. Is there time for it to get to Robin Brooks' 9.50 fair value yet? Don’t think I have ever seen such intraday FX volatility ever in my 30+ year career," said Ash.
- New mechanism
The government has argued that the surge in exchange rates ignored Turkey's strong economic fundamentals and blamed high prices on hoarders and global factors. The benefits of Turkey's new approach will become clear in the next three to six months, according to Erdogan.
"Investors will be encouraged to move towards Turkish lira-based assets by issuance of government bills that are indexed to public economic enterprise revenues that are transferred to the budget," he explained.
The Turkish economy has often surprised with its different dynamics, with the latest remarkable developments taking place since Monday.