The embattled Turkish lira (TRY) has been in something of a ‘seesaw’ phase in the past 24 hours with the markets pondering whether specially arranged meetings of top economic officials in Turkey over May 9-10 were likely to deliver any monetary tightening.

On May 9, the TRY rebounded from its new all-time low of 4.3780 to the dollar recorded in early trading to 4.25 levels after news broke that President Recep Tayyip Erdogan had summoned the government’s economic team and the central bank governor to his Ankara palace for discussions on the lira, down around 11% against the greenback in the year to date. The sudden scheduling of the meeting raised hopes of a ‘snap’ interest rate hike being made before the June 24 snap elections.

However, by evening, investors were displeased to hear that the meeting had actually produced measures to ease interest rates, in line with Erdogan’s unorthodox economic prescriptions. The president contends that interest rate increases would cause inflation in the Turkish economy and that the country needs cheaper money to push investment and drive growth and create jobs. The result of the palace meeting sent the TRY back into retreat at values around 4.30. Erdogan said this week the weakness of the TRY does not reflect the real state of the Turkish economy, but many analysts have concluded the economy is seriously overheated.

On May 10, local reports said central bank governor Murat Cetinkaya was holding a meeting with regulators and the Treasury to discuss exchange and interest rates, and to arrange a cost analysis of the government’s pre-election stimulus and incentive packages. The TRY made headway on the development, gaining 1.1% on the day to 4.2401 per dollar as of 14:45 in Ankara.

May 10 also saw the central bank release data showing foreign currency deposits held by local investors in Turkey fell to $163.75bn in the week to May 4, from $167.17bn a week earlier.

The plight of the TRY was exacerbated late on May 8 when US President Donald Trump announced that he was withdrawing Washington from the multilateral nuclear deal with Iran and reapplying the highest level of sanctions to the Islamic Republic, Turkey’s second largest energy supplier.

The benchmark BIST-100 index on the Borsa Istanbul was by around 16:30 local time on May 10 trading up 1.28% d/d at 102,072.7. The index fell 1.49% d/d to 99,364 by the close on May 8, the lowest level in 10 months.

Markets are worried over whether the central bank has what it takes amid political pressure to fight Turkey’s stubborn double-digit inflation. Snap elections called for June 24 have generated added uncertainty for market players.

The long list of reasons for the TRY’s sharp decline this year include the appreciation of the dollar, with the 10-year US Treasury yield breaking above the psychologically important level of 3%; S&P’s surprise move on May 1 to cut Turkey further into junk on the growing risk of its overheating economy experiencing a hard landing; the ballooning current account deficit; pre-election fiscal expansionary policies; latest PMI data on manufacturing pointing to contraction and signs of corporate debt difficulties that could leave the country’s banks exposed to burdensome problem loans.