Turkey Starts Curbing FX Tool Imposed to Halt Lira Selloff
- New rule is designed to incentivize regular lira deposits
- Mechanism aims to limit cash put in so-called KKM accounts
Customers use automatic teller machines in Ankara, Turkey.
Photographer: Kerem Uzel/BloombergThis article is for subscribers only.
Turkey took a first step away from a tool designed to halt a selloff in the lira by imposing a rule that banks must increase their government bond holdings if they don’t convince their clients to shift to regular deposits in the currency.
The decision is aimed at weaning Turks off of so-called KKM accounts, in which people are offered generous interest rates to deposit lira in a mechanism whose return increases the more the lira depreciates, rather than exchanging the cash for more stable foreign currencies. Bloomberg News first reported in July Turkey’s government would look to terminate the program.