Turkey’s Central Bank to Support Embattled Lira

In a separate opinion piece in the pro-government newspaper Daily Sabah, Erdogan’s spokesman Ibrahim Kalin said Turkey’s efforts to solve the crisis with diplomatic methods had been dismissed by the Trump administration, warning that “the us runs the risk of losing Turkey” as an ally.

The fear is that Turkish firms that took out euro and dollar denominated loans will be unable to repay those debts as the lira collapses, triggering bankruptcies that hit Turkish banks.

But, investors in the public cryptocurrency exchange market have full authority over their funds and are free to sell their holdings of Bitcoin to other foreign currencies like the United States dollar, Japanese yen, and the South korean won. All in all, emerging-market currencies are under weakening bias from all those problems.

On Monday, benchmark stock indexes in Tokyo, Hong Kong and Shanghai were all down more than 1.5% in late morning trading.

All major European indexes were lower, with Spain and Italy leading losses in the first hour of trade.

Turkey’s economy has been in dire straits since mid-2017, largely thanks to extremely high inflation rates, trade tariffs from the U.S. and government borrowing from foreign countries. Gold, along with other commodities that are priced in United States dollars, tends to retreat when the U.S. dollar rises.

Reverberations of the lira fall spread through global financial markets, with European stock markets especially hit as investors took fright over banks’ exposure to Turkey.

The Turkish Lira has slide rapidly since the United States slapped sanctions on two Turkish ministers, and extended its slide Monday morning to a new record low, at over 6.8 to USA dollar at the opening of European and Turkish markets. President Donald Trump tweeted Friday.

On Sunday, Erdogan, in an OpEd The New York Times, cited Turkey’s cooperation with the United States dating back to the Korean War as evidence of a long-standing partnership between the North Atlantic Treaty Organisation allies.

The Turkish lira has nosedived over the past week and tumbled another 7pc on Monday as the central bank’s measures failed to restore investor confidence.

Turkish Finance Minister Berat Albayrak has slightly stemmed the lira’s plummet by announcing that his government has drafted an economic action plan to ease investor concerns.

Albayrak described the Lira’s weakness as “an attack”, echoing President Erdogan, who is his father-in-law. It also said it would slash the amount of funds that banks are required to hold in reserve.

But his comments did little to help the Turkish currency.

The bank released a statement Monday saying it would “provide all the liquidity the banks need”.

Much of the early action was in currencies with the euro gapping lower as the Turkish lira took another slide to all-time lows around 7.2400 at one stage.

Istanbul prosecutor’s office said that Turkey was the target of an economic attack, and pledged to take legal action against all written and visual news as well as social media accounts which serve towards that goal, CNN Turk reported Monday.

The Central Bank of the Republic of Turkey (TCMB) has outlined a range of measures to bolster liquidity and support the financial system. Still, Erdogan indicated he was in no mood to offer concessions to the USA, or to financial markets. “Nobody should listen to speculations”.

Erdogan rejected speculation that Turkey would seek a rescue package from the International Monetary Found.

Turkey’s plight has raised fears of more casualties.

The South African rand fell to its weakest in more than two years, while the Mexican peso and the Indonesian rupiah also declined. India’s rupee lost around 1% against the dollar, touching a record low. He also took higher interest rates off the table and said Turkey wouldn’t accept an global bailout. “Therefore it should not derail the positive fundamentals in other emerging markets over a longer term”.