Turkish Lira bounces back to 5.9 against US dollar

Turkish Lira bounces back to 5.9 against US dollar

ISTANBUL

Turkey’s currency has rebounded to 5.9 against the U.S. dollar, having recovered significantly amid a crisis between Ankara and Washington.

In addition to to the Central Bank's measures to increase liquidity for the banks on Aug. 13 and 14, Banking Regulation and Supervision Agency (BDDK) further limited FX swaps.

"Total notional principle amount of banks' currency swaps and other similar products (spot forward FX transactions) with foreign counterparties where at the initial date local banks pay Turkish lira and receive FX should not exceed 25 percent of the bank's regulatory capital," the agency said on Aug. 15.

On Aug. 13, the agency had put a limit to these transactions at 50 percent of the bank's equities.

The tension between the NATO allies has rose in a couple of issues ranging from the differences in the policies regarding the Syrian conflict to imprisoned U.S. pastor Andrew Brunson, and Turkey’s unmet request for the extradition of U.S. based Islamic preacher Fethullah Gülen who has been accused of masterminding the coup attempt on July 15, 2016 in Turkey.

Washington on Aug. 3 said it was reviewing Turkey’s duty-free access to the U.S. market, a move that could affect $1.7 billion of Turkish exports.

After the announcement triggered a sell-off in Turkish Lira on Aug. 6, the Turkish Central Bank stepped in and loosened the upper limit of banks’ reserve requirements, increasing the liquidity $2.2 billion. 

The lira, which was traded as low as 7.24 against the U.S. dollar on Aug. 13, gained strenght by noon on Aug. 15, climbing to 5.9.

Turkey increases tariffs on U.S.-origin products