Lira pulls back after difficult few days
Turkey’s lira pulled back from a record low of 7.24 to the dollar
The currency has lost more than 40 percent against the dollar this year, largely over worries about President Tayyip Erdogan’s influence over the economy, his repeated calls for lower interest rates, and worsening ties with the United States.
On Friday that relentless slide turned into a crash: the lira dropped as much as 18 percent, hitting U.S. and European stocks as investors took fright over banks’ exposure to Turkey.
The fresh lira collapse on Sunday night hit Asian shares, weakened South Africa’s rand and drove demand in global markets for safe currencies including the dollar, Swiss franc and yen. Shares in Europe’s major banks also lost ground.
The central bank, which surprised markets last month when it left interest rates unchanged despite double-digit inflation and the tumbling lira, announced the moves on liquidity and reserves after Finance Minister Berat Albayrak said authorities would start implementing an economic action plan on Monday.
Bankers also said the central bank would meet banks’ lira liquidity needs at the overnight rate of 19.25 percent — 150 basis points above the benchmark weekly repo rate — though it might not use the overnight funding on Monday because lira liquidity needs were low.
They said the bank’s decision could be the first step towards tightening policy through the use of an interest rate corridor, an instrument used in previous years, rather than an increase in the benchmark rate.
Published: by Radio NewsHub