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Turkish central bank intervenes to halt plunge in value of currency

Monday, 13 August, 2018 - 18:19

Turkey has announced a series of measures designed to stop the fall of its currency, the Turkish lira, which has lost more than 40% of its value against the dollar and the euro this year, against a background of growing tensions with United States.

The Turkish Central Bank said on Monday that it will provide whatever liquidity that banks need, adding that it would take “all necessary measures” to ensure financial stability.

The central bank has revised reserve requirements for banks to avoid any liquidity problems, and said that about 10 billion lira, 6 billion dollars and the equivalent of 3 billion in gold liquidity would be provided to the financial system.

In the early hours of Asian trade on Monday, the Turkish lira continued to fall to its all-time low, breaking the seven-lira-to-one-dollar mark for the first time. 

Further pressure was put on the currency later when President Erdogan made an aggressive speech directed at the United States.

“On the one hand, you’re with us in NATO, and on the other, you’re looking to stab your strategic partner in the back. Is such a thing acceptable? Said Erdogan during a speech in Ankara on Monday, addressing the United States directly.

At the heart of the tensions between the two countries is the fate of the American pastor Andrew Brunson, currently charged in Turkey with “terrorism” and “espionage.

If Washington is ready to sacrifice its relations with Ankara, Turkey will react “by moving to new markets, new partnerships and new allies, at the expense of the one who launched an economic war against the whole world, including our country,” Erdogan threatened.

Turkey also accuses the United States of supporting the Kurdish People’s Protection Units (YPG) in Syria. Ankara sees this militia as an offshoot of the PKK (Workers’ Party of Kurdistan), classified as a terrorist by Turkey but also by the United States.

Washington calls for the immediate release of Pastor Brunson, who faces up to 35 years in prison, while Turkey pleads for the extradition of Fethullah Gülen, a Turkish preacher who has been on US soil for nearly 20 years and is suspected by Ankara of organising the failed coup of July 2016.

In addition to these tensions, economists are worried about Erdogan’s grip on the economy, which has strengthened after his re-election last June. The markets urge the central bank to further raise interest rates to support the lira and control galloping inflation, which reached nearly 16% in July year on year.

 


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