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ANKARA: The lira weakened on Tuesday as Finance Minister Nureddin Nebati pitched Turkey's unorthodox economic policy to investors in London, while data indicated the central bank's foreign reserves shot up by $5-6 billion last week.

Lira dipped 0.3% to 13.62 to the dollar by 0740 GMT.

It has held steady this year, having slumped 44% in 2021 after the central bank slashed its policy rate in line with an unorthodox policy driven by President Tayyip Erdogan.

Late on Monday, Nebati said his London investor meetings were very positive and they had discussed Turkey's new economic model. He was to hold two group meetings on Tuesday as part of his first foreign trip since starting the job in early December.

Turkish lira dips, minister sees more forex converted to lira

Under the new model, the government aims to ease inflation by creating a current account surplus - rather than by hiking the policy interest rate, which was cut to 14%. Annual inflation soared to a 20-year high of 48.69% in January.

According to bankers' calculations, based on the central bank's analytical balance sheet data, the bank's net and gross reserves rose some $5-6 billion last week.

Bankers said the rise may be due to the bank's $4.7 billion swap accord with the United Arab Emirates and a new requirement that 25% of exporters forex earnings be sold to the bank. Swap deals with foreign central banks help bolster the reserves which were eroded by forex market interventions amounting to some $20 billion in December, when a full-blow currency crisis hit.

From January, the central bank has followed a more active forex reserves policy. Several bankers have described the situation as a managed exchange rate or "dirty float".

The lira hit a record low of 18.4 in late December but rebounded after the state interventions to support it and Erdogan's announcement of a scheme to boost lira deposits by protecting them against depreciation.

The volume of deposits under the lira protection scheme now exceeds 290 billion lira ($21.4 billion), the government says. On Monday data showed sales of foreign currency to Turkey's state economic enterprises - primarily energy importer BOTAS - reached a record $4.15 billion in January.

Investors are also eyeing the Treasury's foreign borrowing plans after Bloomberg reported that Turkey was preparing for its first global bond sale since the lira plunge, with HSBC among banks picked for a potential sukuk sale this month.

According to Refinitiv data, the Treasury is due to pay off a $2 billion eurobond on Feb. 21 and a $1.1 bln domestic bond on Feb. 25.

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