ISTANBUL: Turkey's lira firmed on Thursday as it continued to recover from a record low hit in the previous session, when President Tayyip Erdogan held an unscheduled meeting of his economic team to address the currency sell-off.
Erdogan and the economic team on Wednesday agreed to take measures to ease interest rate pressure and help shield the tumbling lira, underscoring the deep divide between the president and international investors over monetary policy.
A self-described "enemy of interest rates" who believes high rates cause inflation, Erdogan also met with the central bank governor and the heads of some of Turkey's biggest banks.
Earlier on Wednesday the lira, which is down some 13 percent this year, touched a fresh record low. It has recovered somewhat on news of Erdogan's meeting - as investors appear to be hoping for some additional tightening measures.
"The central bank is not really allowed to hike rates even though it needs to. Either you hike the rates or you have a cheaper currency," said Andreas Koenig, head of global foreign exchange for Amundi Asset Management.
"It doesn't look nice. There is not enough money to intervene and there is a lot of foreign debt. And they are just blaming speculators. There is not the political willingness to do something."
The lira was at 4.2460 at 1136 GMT, gaining 1 percent from Wednesday's close of 4.2880. It touched a record low of 4.3780 in early trade on Wednesday. The currency is one of the worst performing emerging market currencies so far this year.
The gains accelerated after broadcaster Bloomberg HT said the central bank governor, treasury undersecretary and other top economic bureaucrats would hold a meeting on Thursday. However, it cited sources as saying the meeting was routine and not related to Wednesday's meeting with Erdogan.
The benchmark stock index fell 0.79 percent to 99,988 points.
The yield on the benchmark 10-year government bond eased for a second day to 13.67 percent. The yield briefly spiked to its highest in at least eight years on Wednesday, topping 14.2 percent.
The central bank's inability to rein in double-digit inflation has increased the perception that it is under political pressure from Erdogan, who wants to see lower borrowing costs, particularly for the construction and real estate sectors.
Separately, state lender Ziraat Bank lowered its interest rate for housing loans with a maximum maturity of 10 years and an amount of up to 500,000 lira ($117,000) to a monthly 0.98 percent with effect from May 11, it said on Thursday.
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