Published: Mon, August 13, 2018
Markets | By Noel Gibbs

Turkey central bank ready to take 'all necessary measures' for stability

Turkey central bank ready to take 'all necessary measures' for stability

In other commodity markets, gold was no beneficiary of safe haven flows, in fact it was lower almost 1 per cent at $1198.25 an ounce.

Japan's Nikkei lost 1.6 percent, China's blue-chip index lost 1.4 and Hong Kong stocks were also down 1.6 percent.

All major European indexes were lower, with Spain and Italy leading losses in the first hour of trade.

Turkey's president lashed out at the United States during a defiant speech Sunday, as the lira crumbled further following President Donald Trump's approval of higher tariffs and the threat of sanctions over an imprisoned pastor.

Zarif met repeatedly with then U.S. secretary of state John Kerry during the negotiation and implementation of the 2015 agreement - but those relatively warm ties were abruptly ended when the Trump administration came to power.

Turkey would also be reluctant to seek assistance from the International Monetary Fund after clearing billions of dollars of debt to the fund under Erdogan.

The Turkish lira hit a fresh record low on Monday with a further 6 per cent drop after the Trump administration's doubling of tariffs on steel and aluminium imports from the nation sent the currency tumbling 18 per cent on Friday.

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The dispute between the two North Atlantic Treaty Organisation allies - which reached new intensity over the detention of an American pastor in Turkey - has hammered the lira and also raised questions over the future partnership between Washington and Ankara.

The lira "slides rapidly downward against our very strong Dollar!"

Donald Trump, left, talks to Recep Tayyip Erdogan as they tour the new North Atlantic Treaty Organisation headquarters in Brussels in July.

Also caught up in the sell-off is Russia's ruble, which today hit its lowest level against the United States dollar since April 2016 and its lowest level against the euro since April this year, partly reflecting the high amount of borrowing in foreign currencies by Russian corporates, but also concern about the damage that the latest round of USA sanctions against Moscow - imposed in the wake of the Salisbury poisonings - will do to the country's economy.

The Turkish lira has nosedived over the past week and tumbled another 7pc on Monday as the central bank's measures failed to restore investor confidence.

The Turkish finance minister says his government has prepared an "action plan" to help ease market worries as the national currency continues to tumble in the face of planned USA sanctions.

In the interview with Hurriyet newspaper, Albayrak described the lira's weakness as "an attack" - echoing Erdogan, who is his father-in-law.

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The markets began to recover Monday, however, when Turkey's Central Bank said it was ready to take "all necessary measures" to help Turkish banks manage their liquidity.

The crash saw European markets fall sharply when markets opened, particularly in countries with banks exposed to the Turkish currency, such as Spain's BBVA, Italy's UniCredit and France's BNP Paribas. The lira was down around 7% against the dollar in afternoon trading in Europe.

On Monday, the Central Bank annouced in a statement a series of steps to "provide all the liquidity the banks need".

Iran too has suffered a major decline in its currency this year - in part due to United States abandonment of the nuclear deal - with the rial losing more than half its value against the dollar since April.

Meanwhile, Turkey's interior ministry said it will take legal action against hundreds of social media accounts that it says are provoking a drop in the lira.

Last week, Goldman Sachs said in a research note that a depreciation of the lira to 7.1 to the dollar would erode Turkish banks' excess capital.

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