FT/ DW/ Turkish Govt: The Turkish Central bank said it will “provide all the liquidity the banks need” as the Turkish lira continued to tumble. Prosecutors have meanwhile threatened to go after those that “threaten economic security.”
In a statement the Central Bank said it would “take all necessary measures to maintain financial stability” and “provide all the liquidity the banks need.” The central bank specified several measures to manage lira liquidity and provide sufficient foreign currency to banks.
Prior to this announcement the Turkish lira was trading sharply lower on Monday even after the country’s central bank announced measures to shore up the financial system amid warnings of a deepening crisis.
The beleaguered currency fell as much as 11 per cent to a new record low of TL7.2362 to the dollar in early Asian trading. It later rallied, but was trading at TL6.85 to the dollar in early European trading, still 6.5 per cent lower on the session. Turkish stocks were also hit, with the BIST 100 benchmark index dropping 2.3 per cent, reaching its lowest level in US dollar terms since early 2009.
Monday’s central bank announcement made no mention of raising interest rates, a move economists say is necessary to shore up the currency and show that the central bank is independent.
“The decline in the lira is multifaceted, caused not only by a weak external position in terms of current account deficit and inadequate currency reserves, but also the challenging political environment which exacerbates the vulnerabilities in the lira,” said Kerry Craig, global market strategist at JP Morgan Asset Management.
“A mid-meeting rate hike and tightening of monetary policy may help to avert the lira’s decline, to some extent,” he said.
Turkish authorities have meanwhile shot down the idea of reaching out to the International Monetary Fund (IMF).