Turkey Central Bank moves to support lira after it hits record low
Turkey’s central bank has intervened to bolster the crisis-hit lira by decreasing its foreign exchange reserve requirement rations in order to inject $1.5 billion into the market.
Turkey’s currency has been sliding following political chaos which drove lira to a record low on Monday.
“Foreign exchange reserve requirement ratios have been reduced by 50 basis points for all maturity brackets,” the bank said in a statement.
It also noted that with this revision, an additional liquidity of approximately $ 1.5 billion will be provided to the financial system.
Immediately after the bank’s announcement, the lira began recovering against the dollar.
The bank went on saying that some additional steps may be taken to maintain price stability and financial stability in the country.
The bank attempted to slam the breaks on the lira plunge in November by raising interest rates for the first time since 2014.
Analysts say the decision might be viewed as a smoothening step, but might not reverse the actual course.
They also predict that the debate in parliament over a controversial new draft constitution aimed at expanding the powers of presidency under Recep Tayyip Erdogan could compound the currency’s woes.
The debate kicked off on Monday and is expected to last two weeks.
The lira has lost about 20 percent in value against the dollar over the last three months. It slumped to a new low Monday as political uncertainty in the country took its toll.
Moody’s and Standard & Poor’s lowered Turkey’s rating to junk status in 2016 and the country is facing a similar move by Fitch later this month.