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You can find the current article at its original source at https://www.theguardian.com/world/2018/aug/13/turkey-financial-crisis-lira-plunges-again-amid-contagion-fears
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| Turkish lira crisis: central bank action fails to quell contagion fears | Turkish lira crisis: central bank action fails to quell contagion fears |
| (35 minutes later) | |
| Turkey’s central bank has acted to stem the lira’s crash, but the intervention was not enough to quell investors’ fears that the country’s financial crisis could spread to European markets. | Turkey’s central bank has acted to stem the lira’s crash, but the intervention was not enough to quell investors’ fears that the country’s financial crisis could spread to European markets. |
| The lira pulled back from from a fresh record low overnight but was still trading steeply lower at nearly 7% down against the dollar on Monday morning. The euro was also trading at a one-year low. | The lira pulled back from from a fresh record low overnight but was still trading steeply lower at nearly 7% down against the dollar on Monday morning. The euro was also trading at a one-year low. |
| The lira’s performance continued to underwhelm despite the central bank pledging to provide liquidity and cut lira and foreign currency reserve requirements – a cash buffer – for Turkish banks. | The lira’s performance continued to underwhelm despite the central bank pledging to provide liquidity and cut lira and foreign currency reserve requirements – a cash buffer – for Turkish banks. |
| Turkey’s central bank said: “[We] will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary.” | Turkey’s central bank said: “[We] will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary.” |
| The Ankara-based bank pledged to provide “all the liquidity the banks need”. | The Ankara-based bank pledged to provide “all the liquidity the banks need”. |
| However, it has not raised interest rates, which some economists argue is necessary to alleviate the crisis because it will curb inflation and deter investors from selling the lira. The Turkish president, Recep Tayyip Erdoğan, has warned against raising borrowing costs. | However, it has not raised interest rates, which some economists argue is necessary to alleviate the crisis because it will curb inflation and deter investors from selling the lira. The Turkish president, Recep Tayyip Erdoğan, has warned against raising borrowing costs. |
| The Turkish finance minister, Berat Albayrak, who is Erdoğan’s son-in-law, said at the weekend that authorities would start implementing an economic action plan on Monday morning. He rejected capital controls as an option to stem outflows of hard currency. | The Turkish finance minister, Berat Albayrak, who is Erdoğan’s son-in-law, said at the weekend that authorities would start implementing an economic action plan on Monday morning. He rejected capital controls as an option to stem outflows of hard currency. |
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| Following his comments, Turkey’s banking regulator announced late on Sunday night that it would limit the ability of the country’s banks to swap the lira for foreign currency. | Following his comments, Turkey’s banking regulator announced late on Sunday night that it would limit the ability of the country’s banks to swap the lira for foreign currency. |
| Investors are concerned about the exposure of European banks including Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, which have big operations in Turkey. European bank shares dropped 2% in early trading on Monday. | |
| The FTSE 100 was down nearly 0.5% on Monday morning, with Germany’s Dax down 0.7% and the CAC in Paris down 0.4%. Asian stock markets were also down. | |
| The Turkish stock market lost 4%, with some bank stocks suffering double-digit losses. The Russian rouble, Australian dollar, South African rand, and the Mexican and Argentine peso – other emerging currencies that could be at risk – also fell. | The Turkish stock market lost 4%, with some bank stocks suffering double-digit losses. The Russian rouble, Australian dollar, South African rand, and the Mexican and Argentine peso – other emerging currencies that could be at risk – also fell. |
| Fiona Cincotta, a senior market analyst at City Index, warned that the slump in the lira could prompt some companies to default on their US dollar loans, triggering a domino effect. | |
| “For the time being Turkey’s financial crisis looks localised but the country’s central bank has perhaps only days to stop the decline of the currency before the lira’s freefall results in loan defaults, starts seriously affecting the country’s financial system and potentially starts spilling over onto European banks.” | |
| The falling lira fuelled demand for safe havens, including the greenback, Swiss franc and yen. The Vix volatility index measuring turbulence in financial markets – also known as the fear index – jumped 16%. | The falling lira fuelled demand for safe havens, including the greenback, Swiss franc and yen. The Vix volatility index measuring turbulence in financial markets – also known as the fear index – jumped 16%. |
| The lira has tumbled more than 40% this year on worries about Erdoğan’s increasing control over the economy and worsening relations with the United States, chiefly over the war in Syria. | The lira has tumbled more than 40% this year on worries about Erdoğan’s increasing control over the economy and worsening relations with the United States, chiefly over the war in Syria. |
| The US sanctioned two ministers in Erdoğan’s government in a spat over the continued detention of an American pastor in Turkey, and doubled tariffs on Turkish steel last week. | |
| While the Trump row helped trigger a run on the lira last week that continued on Monday, the market moves against the Turkish currency reflect deeper problems for one of the world’s largest emerging economies. Turkish companies have made significant borrowings, including large amounts in dollars, and have raised $220bn (£172bn) in debt – which has become more expensive to repay as the lira has fallen.The central bank is under pressure to increase borrowing costs – despite Erdoğan’s misgivings – as a countermeasure against rising inflation and capital flight. But some economists warn this could also push Turkey into a recession. | While the Trump row helped trigger a run on the lira last week that continued on Monday, the market moves against the Turkish currency reflect deeper problems for one of the world’s largest emerging economies. Turkish companies have made significant borrowings, including large amounts in dollars, and have raised $220bn (£172bn) in debt – which has become more expensive to repay as the lira has fallen.The central bank is under pressure to increase borrowing costs – despite Erdoğan’s misgivings – as a countermeasure against rising inflation and capital flight. But some economists warn this could also push Turkey into a recession. |
| country exposure to #Turkey debt -BIS#TurkeyCrisis pic.twitter.com/lJQBYsQepb | country exposure to #Turkey debt -BIS#TurkeyCrisis pic.twitter.com/lJQBYsQepb |
| Andrew Kenningham, the chief global economist at Capital Economics, said: “The plunge in the lira which began in May, now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis. | Andrew Kenningham, the chief global economist at Capital Economics, said: “The plunge in the lira which began in May, now looks certain to push the Turkish economy into recession and it may well trigger a banking crisis. |
| “This would be another blow for emerging markets as an asset class, but the wider economic spillovers should be fairly modest, even for the eurozone.” | “This would be another blow for emerging markets as an asset class, but the wider economic spillovers should be fairly modest, even for the eurozone.” |
| #EXPOSED: #Erdogan is a 'Snake Oil Salesman' It took 10 years to expose his #CORRUPTION#Turkishlira is a drastic fall in value against the US dollar for the second time in the week. A serious economic crisis before the country. Photo: @TSH_News#Turkey #TurkeyCrisis #Lira pic.twitter.com/t7UQflf371 | #EXPOSED: #Erdogan is a 'Snake Oil Salesman' It took 10 years to expose his #CORRUPTION#Turkishlira is a drastic fall in value against the US dollar for the second time in the week. A serious economic crisis before the country. Photo: @TSH_News#Turkey #TurkeyCrisis #Lira pic.twitter.com/t7UQflf371 |
| On Sunday Erdoğan accused foreign countries of waging war on Turkey and said his government would respond with trade measures to reduce reliance on the dollar and US markets. | On Sunday Erdoğan accused foreign countries of waging war on Turkey and said his government would respond with trade measures to reduce reliance on the dollar and US markets. |
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