Turkish lira stabilizes after central bank intervention

Turkish lira stabilizes after central bank intervention

ANKARA - Agence France-Presse
Turkish lira stabilizes after central bank intervention

A file picture shows a security official standing guard in front of a display of the new Turkish banknotes during a media presentation in the Central Bank's Banknote Printing House in Ankara. AFP Photo

The Turkish currency, the lira, stabilized in early trading on Tuesday, having rallied on Monday after the Central Bank intervened on the foreign exchange market.

The lira was being traded at 1.9354 to the dollar in mid-morning trading on Tuesday. On Monday it had fallen to a record low level of 1.9740 to the dollar.

On the government debt market, Turkey’s 10-year borrowing rate eased slightly but remained high at 8.80 percent compared with 8.93 percent late on Monday. The Central Bank sold dollars to shore up the Turkish currency, as it announced urgent and “strong” action on Monday to defend the lira and clamp down on overheated lending by the financial sector.

The Central Bank had opened seven foreign exchange auctions on Monday, selling a total of $2.25 billion, Finansbank said.

The Central Bank said that it would pursue the new measures for as long as the lira was under pressure. But market analysts were sceptical that this policy, which involves using up foreign currency reserves, would be enough to shore up the lira for long and avert an increase in official short-term interest rates.

They said that the main factor putting the lira under pressure was the prospect that the U.S. Federal Reserve bank would begin to wind down its special injections of money to stimulate the U.S. economy.

This had caused an outflow of some risk investment funds from emerging economies, and the lira had been hit particularly hard, they said.