Turkish Lira Recovers, But The Peso Maintains Losses
The Turkish lira recovered from a historical low 7.24 per dollar, although the crisis around the currency continued to shake global markets, Reuter the peso fell to its weakest level in more than a month on last Monday due to a wave of aversion to risk assets derived from concerns over the crisis in Turkey, and a rise in the dollar, the local currency traded at 19.22 per dollar, with a loss of 1.68%, or 31.75 cents, compared to 18.9025 for the Reuters reference price on Friday, during international operations at dawn, the Mexican peso depreciated to 19,3760 units per US currency, its worst level since 5.
Turkish Lira Recovers, But Markets Remain Nervous
The Turkish lira recovered on last Monday from an all-time low of 7.24 per dollar, after the central bank pledged to provide liquidity and reduce reserve requirements for local banks, although the crisis around the currency continued to shake global markets, the lira has lost more than 40% against the dollar this year, largely due to concerns about the influence of President Tayyip Erdogan on the economy, his repeated calls to lower interest rates and the worsening of relations with the United States Of America.
The constant fall of the currency became a collapse on Friday: the lira fell up to 18%, impacting the US and European shares as investors showed their fear for the exposure of banks to Turkey. The lira’s collapse hit Asian equities on Sunday night, weakened the South African rand and boosted demand in global markets for currencies considered as safe assets, including in the dollar, the Swiss franc, and the yen. The shares of the main banks in Europe also lost ground
The Turkish central bank, that surprised the markets in the last 35 days where it had left the interest rates without a change despite the double-digit inflation and the lira’s fall, the decisions were announced by it on liquidity and reserves after the finance minister, Berat Albayrak, said that the authorities are going to start implementing an economic action plan on Monday.
The bankers also said the central bank would cover the bank’s lira liquidity needs at an interbank rate of 19.25%, 150 basis points above the weekly repo reference rate, although it might not use Monday’s financing suddenly because Liquidity needs of the lira were low.
The central bank said it reduced the lira reserve ratio, a cushion of cash in the hands of banks, by 250 basis points for all maturities and that the ratio of mandatory reserves for non-core exchange liabilities by 400 points fell, basic for maturities of up to three years, the measures will release up to 10,000 million lira, 6,000 million dollars, and 3,000 million dollars equivalent of liquidity in gold in the financial system, the bank said, he also promised to provide” all the liquidity that banks need.”
While the measures must be alleviated interests about financial stability, they are not going to have like a direct impact on the lira because they actually never have a bad effect on the banks, exchange positions, Erkin Isik said strategist at British National Party Paribas, in a note, the currency reduced its losses in the last few days after comments from Albayrak and the central bank’s announcement, and traded at 7.00 per dollar at 1146 GMT, or (Greenwich Mean Time)