The Turkish lira is getting harder to buy

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The Turkish lira is getting harder to buy

The Japanese day traders' affection for the Turkish lira is getting seriously tested, with the currency's extreme volatility leaving the hardiest speculators hanging in there.

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Retail investors increased their net long positions by 5,444 contracts on Monday after slashing them by 18,716 contracts to the lowest level since January, according to Tokyo Financial Exchange Inc. data compiled by Bloomberg.

The lira surged 24% against the yen on Monday, the biggest daily jump since 1984.

The latest gains came after Turkey announced extraordinary measures to bolster a currency hammered in recent months by President Recep Tayyip Erdogan's policy to use lower interest rates to combat inflation. It is not clear whether the measures will benefit foreign investors, including the introduction of a new program to protect savings from currency fluctuations.

Since the lira's moves are just too extreme, Japanese retail investors have turned away from it as a pure investment, leaving only short-term players in the market, said Takuya Kanda, general manager at Gaitame.com Research Institute in Tokyo.

Even these more aggressive speculators probably won't actively trade the Turkish currency for a long time, especially since thin pre-holiday liquidity tends to exacerbate market moves, Kanda said.

Short-term players usually enter short lira positions and buy it back in a day, but a move like the one overnight removes any incentive to stay in markets, Kanda said. How can I run a business with friends without killing the friendship?

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