Turkey’s central bank announced Monday a raft of measures aimed at calming markets rattled by the precipitous plunge of the Turkish lira but the embattled currency came under new pressure in early trade.
A dispute between NATO allies Turkey and the United States — which reached new intensity over the detention of an American pastor — has hammered the lira and also raised questions over the future partnership between Washington and Ankara.
It caused global market jitters last week as investors fretted over potential economic contagion from Turkey, particularly to European banks.
The already embattled Turkish lira tumbled some 16 percent against the dollar on Friday as US President Donald Trump said he had doubled steel and aluminium tariffs on Turkey.
In early European trade on Monday, the lira was trading at 6.6 to the dollar, a loss of another 3.3 percent on the day but recovering from even sharper losses in earlier Asian trade which it struck a record low of 7.2362 to the dollar.
In its first statement since what was dubbed “Black Friday” in Turkey, the central bank said it was ready to take “all necessary measures” to ensure financial stability, promising to provide banks with “all the liquidity” they need.
The bank also revised reserve requirement ratios for banks, in a move also aimed at staving off any liquidity issues. However the statement gave no clear promise of rate hikes, which is what most economists and analysts say is needed to ease the crisis.
– ‘Tool of exploitation’ –
Turkey’s Finance Minister Berat Albayrak late Sunday said Ankara was planning to roll out an “action plan” on Monday in response to the crisis.
“Our institutions will take necessary action from Monday in order to relieve the markets,” he said, adding that the plan would centre on “the state of our banks and the small and medium size enterprises” most affected by the lira’s plunge.
Albayrak’s comments came as his father-in-law, President Recep Tayyip Erdogan, said he was in no mood to offer concessions to the United States in one of the worst spats between the two NATO allies in years.
“The aim of the operation is to make Turkey surrender in all areas, from finance to politics,” Erdogan told ruling party members in the Black Sea city of Trabzon.
“We are once again facing a political, underhand plot. With God’s permission we will overcome this,” he added.
Analysts say that while Washington’s sanctions against Ankara sparked the immediate crisis, Turkey’s economy has been risking trouble for a while due to high inflation and the weak lira.
The central bank has over the last few weeks defied calls from markets for rate hikes to combat these problems, raising fears of interference from Erdogan who has repeatedly called for low interest rates.
Erdogan had on Saturday described interest rates as a “tool of exploitation”, in remarks unlikely to impress the markets.
“Investors need to see serious economic measures and not political ones to prevent things getting completely out of control,” said Hussein Sayed, chief market strategist at FXTM, saying this had to include an emergency rate hike.
Source: AFP
