The Central Bank of Turkey (CBRT) Monday increased reserve requirement ratios for foreign exchange (FX) deposits to support financial stability.
The rise came in 200 basis points, the bank said in a written statement.
"As a result of this, $4.2 billion of FX liquidity will be withdrawn from the market," the CBRT added.
The decision covers FX deposits and participation funds for all maturity brackets.
The bank lowered the ratio two times in 2019, in February and May, respectively.
The latest move by the central bank makes it more costly for banks to keep forex deposits, one trader said. "It aims to make it more attractive for banks to collect lira deposits," the trader said. "As a secondary effect, it is a decision that will increase the central bank's reserves."
The central bank's move helped the currency strengthen briefly on Monday.
The lira stood at 6.06 against the dollar at 10:10 a.m. GMT, having earlier firmed to 6.04. It was around 6.06 before the central bank's announcement.
The bank's reserves were $96.3 billion as of March, with $74 billion foreign currency reserves and $20.8 billion gold reserves.