City A.M. – Business
Turkeys currency has managed to interrupt its catastrophic fall by rebounding six per cent this morning.
The lira has mitigated two days of selling that saw its value plunge nearly 14 per cent on Friday and a further 6.3 per cent yesterday, clawing back six per cent to be worth 6.5 lira to the dollar, from 6.88 yesterday.
But the currency has still lost a quarter of its value just this month, while it stood at 3.7 lira to the dollar at the start of this year.
Turkeys President, Recep Tayyip Erdogan, earlier this week claimed the country was under economic “siege” as the lira shedded value, dragging down the MSCI world equity index with it.
Analysts yesterday recommended Turkey take a variety of actions to curb the currencys fall, such as “orthodox” fiscal policies and mending relations with the US, where the Trump administration is pushing for the release of detained pastor Andrew Bunson.
Actions taken today appear to have helped, with trading group XM crediting Turkeys central bank with some positive actions.
“After trading in risk-off mode over the past few sessions amid worries that the crisis in Turkey could spill over into other economies, markets appear to have calmed down a little on Tuesday,” said XM investment analyst Andreas Georgiou.
“The Turkish central bank took some steps to enhance liquidity yesterday, which although falling short of addressing the bigger issues in the troubled economy, still appear to have done the trick for now – providing some much-needed relief to the Turkish lira and risk-sensitive assets.”
However, he added called the small rise “a breather in the bigger picture”, and analysts are looking out for more concrete action from Turkish authorities, both on monetary policy and on fixing their relations with the US.
Kit Juckes, macro strategist at Societe Generale, said: “The diplomatic standoff remains intact as the US awaits a response to their ultimatum to release Pastor Andrew Brunson. It seems highly unlikely that market confidence can be restored in the absence of tighter monetary policy too.”