Daren Butler and Nevzat devranoglu

ANKARA, Reuters – Tuesday’s volatile trade saw a further drop of 4% after falling to new all-time lows on Tuesday. The decline was due to concerns about President Tayyip Erdogan’s reckless economic policies and the prospects of another rate cut.

After losing almost half its value to the dollar, the ailing currency reached 14.4 before losing losses to 14.3450 at 1042 GMT.

Monday’s lira fell as low as 7% to a near record high of 15. Then, it whip-sawed back after the central banking (TCMB), intervened for a fourth time in just two weeks to stabilize it.

One forex trader from a bank said, “When we look back at yesterday’s transactions we see a rise of volumes with strong Forex demand from locals.”

“The concern over the TCMB’s interest rate cuts will keep them at it, is triggering the expectation of continued lira gains. It is therefore difficult to project an optimistic future for the lira.”

These domestic woes are set against the backdrop of market turmoil around the world. Investors are watching for signs that the Federal Reserve will raise interest rates by 2022, as dollar prices have firmed in advance of Wednesday’s key Federal Reserve meeting.

Erdogan’s aggressive monetary easing and 400 basis-point rate reductions by Turkey’s Central Bank since September have contributed to the lira’s slump.

Erdogan met with Sahap Kavcioglu (Central Bank Governor), Nureddin Nebati (Finance Minister) and other heads of state banks on Monday to discuss the sharp decline in Turkish earnings. However, no formal announcements were made after these talks.

Erdogan supports rate cuts and has advocated them repeatedly. He also promotes an economic plan which prioritizes credit growth and production.

Officials said that due to the pressure on the budget from the Lira sale and pending wage rises, it is expected that soon the government will present an additional budget to parliament for the next year.

Although the central bank had hoped to keep the currency below 14 last week, it abandoned this goal on Monday. Inflation is a result of depreciation in the large emerging market economy, which heavily depends on imports.

According to a Reuters poll, despite inflation rising to 21.3% last months, the bank will likely cut its rate by 100 basis points Thursday.

A central bank with depleted foreign reserve and easing policies is at risk from forex market intervention.

On Monday, three traders estimated that the central bank made sales of between $2 billion and $2.5 billion. Bankers analyzing official data calculated that $2.5 billion was sold in the three initial efforts.