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The Turkish lira headed for its biggest gain this year, extending Friday’s advance after the government announced new measures to bolster the currency and cool lending.  

The lira jumped more than 5% to 16.0956 per dollar, the strongest advance among emerging markets, taking its two-day rally to almost 8%. 

The country’s banking regulator is restricting commercial lira loans to corporate borrowers if they hold more than 15 million liras ($890,000) in foreign-currency and if the amount exceeds 10% of total assets or annual sales, the regulator announced Friday after markets closed.  

Turkey’s Ban on Lira Loans to Some Firms Triggers Rally 

The move is one of the most forceful attempts to support the lira this year by Turkey’s authorities without resorting to a rate hike. Unorthodox monetary policies that favor low interest rates have left the country with the biggest negative rates when adjusted inflation. 

The initial impact of the new regulations will be “severe,” but the measures may ultimately only provide short-term relief once large companies like exporters reduce their foreign currency exposure in response, Deutsche Bank economist Fatih Akcelik and Christian Wietoska write in a note. 

The lira was trading 2% higher at 16.5985 per dollar as of 9:27am in Istanbul.

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