Turkey's lira suffered its worst one-day fall on Friday since the country's crisis lastyear, amid a global retreat by investors from riskier assets. On a day marked by rising unease over the resilience of the global economy, the lira fell over 5 per cent against the dollar to as low as TL5.82, breaking a period of relative calm in Turkish financial markets so far this year. Emerging market currencies were one of the bigger casualties on Friday, as weaker German manufacturing data fanned fears that the global economy was sharply slowing. The weakness in the lira appeared toprompt the country's central bank to try to tighten monetary policy, analysts said, in an effort to stem the drop. "The sell-off was triggered by an accumulation of negativefactors," noted Piotr Matys, an EM foreign exchange analyst at Rabobank. "Riskaversion increased following fresh signals of a slowdown in the eurozone where the German and French manufacturing PMIs were weaker than expected in February." Turkey's benchmark stock index slumped 3.5 per cent, while a 10-year dollar bond maturing in 2028 had its steepest rise in yieldimplying a fall in pricesince the aftermath of the lira crisis last year. Meanwhile, the cost of buying credit defaultswaps on Turkey's sovereign debt soared, with the spread a measure of the riskiness of Turkish debtrising 40 basis points to 392 bps. Some analysts said thelira's decline was deepened as domestic banks, which had been selling dollars tobuy lira, stepped away from the market. Banks had helped to stabilise the currencythis year, several analysts said. "Today the unsustainable nature of state-owned banks being the only sellers of [US dollars in exchange for lira] over recent weeksbecame evident," said Roger Hallam, chief investment officer for currencies at JPMorgan Asset Management. One economist at a large Asian bank, who asked notto be named, added that the lira's dramatic fall on Friday was also partly down toquestions around whether the central bank intervened in foreign exchange markets in the last month. The central bank normally discloses any intervention in the currencies market. But despite an unusual $6bn decline in net forex reserves in recent weeks there has been no official announcement about buying the lira to stemthe dollar's rise. "The lack of transparency around why FX reserves fell so sharplyand so fast added to an already negative sentiment in emerging markets currencies and contributed to the start of the large sell-off," saidthe economist at the Asianbank. A spokesperson for Turkey's central bank did not respond to a request forcomment. Local residents, too, have been stockpiling dollars as they attempt to shield savings from inflation eroding their value, putting further negative pressure on the currency, noted Mr Matys.[...]

A) What kind of underlying exchange rate regime is implied in the article? Provide a short explanation and comparison of advantages and disadvantages of floating and fixed exchange rate regimes in your answer.

B) Ceteris paribus, explain how selling of Turkish government bonds and stocks by foreign investors might influence the exchange rate of the Lira versus the US$. Use a diagram in your answer.

C) Ceteris paribus and disregarding foreign investment, explain how monetary policy intervention recently tried to influence the exchange rate of the Lira versus the US$. Use a diagram in your answer.

D) Ceteris paribus and disregarding foreign investment and monetary policy, explain how Turkish residents might influence the exchange rate of the Lira versus the US$. Use a diagram in your answer.