The Turkish lira was back in free fall on Thursday, dropping 5 percent as liquidity returned to a key London foreign-exchange market, prompting President Tayyip Erdogan to blame the currency's weakness on attacks by the West. After a major liquidity squeeze pushed the London swap rate to a record 1,200 percent on Wednesday, Erdogan told young voters in a campaign event that some banks were playing a game with the currency ahead of nationwide local elections on Sunday.
The lira has been hit by a sweeping lack of confidence among Turks, leading them to snap up record holdings of dollars and gold. Uneasy relations with the United States and concerns about post-election government policy also hurt sentiment, beginning with a more than 4 percent fall in the currency last Friday.
As lira liquidity improved on Thursday, the London overnight swap rate plunged to 35 percent from the crippling 1,200 percent a day earlier, Refinitiv Eikon data showed. It had stood at 24 percent last week.
The lira weakened as far as 5.6465 per US dollar from 5.33 on Wednesday. Last year, it plunged almost 30 percent against the dollar. At 1431 GMT, it stood at 5.5900.
The central bank has taken a series of steps to underpin the lira this week, and bankers said it took one more on Thursday, raising its total lira swap sale limit to 30 percent from 20 percent for swap transactions that have not matured.
It had raised the limit to 20 percent from 10 percent on Monday in a bid to boost the bank's forex reserves, which fell sharply in the first two weeks of March.
As the currency dropped on Thursday the cost of Turkey's debt rose, with the yield on the benchmark 10-year bond climbing to 18.50 percent from 18.21 percent on Wednesday. It has risen two percentage points since last week.