Turkish stocks managed to rise in a shortened session ahead of the holiday, but the lira fell as markets continue to ponder the outlook for a currency that’s beset by an exceptionally unfavorable fundamental backdrop and concerns about central bank independence.

Back in May, in an effort to regain control of the currency after President Recep Tayyip Erdogan’s deadpan Bloomberg TV interview during which he explicitly stated that he would take a more active role in monetary policy following the election, Erdogan let the central bank try an emergency hike to the late liquidity window.

Five days later, CBT simplified the monetary policy framework and on June 7, hiked the one-week repo rate. That hike was met with cheers from the market and a veritable chorus of commentary about the extent to which the central bank had successfully proven its independence on the way to regaining control of the lira.

To say those cheers were premature would qualify as the market understatement of the year.

The simplification of policy entailed going back to the 1-week repo rate, which the central bank effectively ditched more than a year previous. Turkey’s multi-tiered rate regime was (and still is) a source of continual uncertainty for markets. The move to make things more straightforward in May involved setting the one-week repo rate at 16.50% and pegging the overnight borrowing and lending rates at 150 basis points above and below that rate. At the same time, Turkey set the LLW rate (what they were using previously) at 19.5% starting on June 1, which amounted to another 300bps hike on top of the May 23 emergency hike. The June 7 hike noted above took the one-week repo rate to 17.75%, which, according to the new framework, meant the overnight rate moved to 19.25%.

Ok, so last week, the central bank ceased offering one–week repo funding, which effectively forced everyone to use the overnight market. Well, again, the overnight rate is 19.25%, so that’s a stealth rate hike and it’s part of what’s helped the lira regain some of its footing.