Turkish lira edges up from record low on central bank pledge

The Turkish lira pulled back on Tuesday from a record low of 7.24 a day earlier after the central bank pledged to provide liquidity in response to a meltdown which has unsettled global markets.

The lira TRYTOM=D3, which closed at 6.9 on Monday, has weakened 45 percent against the dollar this year, hit by worries over President Tayyip Erdogan’s calls for lower interest rates and worsening ties with the United States.

The weakness of the Turkish currency has rippled through global markets, with its drop of as much as 18 percent on Friday hitting U.S. and European stocks as investors fretted about banks’ exposure to Turkey.

The lira also lost almost 10 percent on Monday, but concerns about it eased in Asian markets on Tuesday. It traded in a range of 6.86-6.9441 in Asia.

Analysts say the crisis has been a long time coming and reflects Turkey’s refusal to raise interest rates to curb double-digit inflation and cool an overheated economy.

President Tayyip Erdogan has said that Turkey is the target of an economic war, denying that economic fundamentals were behind the lira weakness.

source: Reuters