The comeback comes after Turkiye's President Erdogan introduced a new instrument that would allow potential investors in foreign currencies to get the same results while sticking to the lira.

Turkiye's President Erdogan said the series of steps will encourage Turks to hold lira savings rather than dollars.
Turkiye's President Erdogan said the series of steps will encourage Turks to hold lira savings rather than dollars. (Emin Sansar / AA)

Turkiye's lira has made an overnight comeback as the country's president revealed a new financial mechanism to shore up the currency.

On Tuesday morning, the lira/dollar exchange rate dropped to 11.2248 as of 9.30 local time (0630GMT), as it gained almost 40 percent against dollar since Monday evening.

Turkiye's President Recep Tayyip Erdogan on Monday said the new instrument would allow potential investors in foreign currencies to get the same results while sticking to the lira.

Erdogan said the series of steps will ease burdens from a currency crash over the last few weeks and encourage Turks to hold lira savings rather than dollars.

The fresh measures come in the wake of rising prices and exchange rates as the government pursues its "new economic model," which emphasises opposition to high interest.

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New economic model

No Turkish citizen will have to move their savings from the lira to foreign currency, declared Erdogan after chairing a Cabinet meeting in the capital Ankara.

The benefits of the country's new approach will become clear in the next three to six months, according to the president.

Government officials say the exchange rates ignore Turkiye's strong economic fundamentals and have blamed high prices on hoarders and global factors.

Some $1 billion was sold in markets after his announcement, the head of the Turkish Banks Association said.

Before the announcement, the lira was down more than 10 percent at an all-time low of 18.4 against the dollar. It later shot back to as far as 12 - its biggest intra-day rally on record - to end the day up 25 percent.

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Source: TRTWorld and agencies