© Reuters. “Bloomberg”: the Turkish lira is falling to a new record after the failure of the “Turkish Central” interventions
It retreated during Thursday’s trading to its lowest level against the US dollar since last May, after the central bank’s attempts to intervene in the money market failed to reassure investors.
According to a report published by “Bloomberg” news agency, the value of the Turkish currency has eroded by about 2.55% to 7.2271 against the dollar, becoming the biggest loser in emerging market currencies, and the cost of insurance against defaults on government bonds increased to the highest level in three months, and on the stock exchange, an index lost The main shares were 4.8%, being the worst among the stock markets in developing countries.
The agency concerned with global economic affairs stated that the basis of the turmoil in the lira is due to concerns about the level of Turkey’s foreign exchange reserves, and a strong wave of interest rate cuts, which led to an influx of foreign capital abroad.
And “Bloomberg” stated that Turkish officials exert pressure on state-owned banks to support the lira by increasing dollar sales, instead of raising interest rates or curbing the supply of credit.
The Turkish central bank had cut interest rates nine times in a row by a total of 1.575 basis points since July 2019 before stopping for two months so far, and in the meantime, banks provided credit incentives and policymakers pumped more liquidity through the issuance of government bonds.
Experts of “Goldman Sachs” and “Oxford Economics” believe that there is an opportunity to raise interest soon, as the official borrowing costs in Turkey are among the lowest in the world, and have been less than zero throughout the year.
The Turkish Central Bank, in its last meeting on July 23, had kept interest rates steady at 8.25% for the second month in a row after an easing cycle that lasted for about a year, after reducing them from a level of 24%.
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