Turkish lira tumbles in echoes of last year's meltdown
* Markets shrug off central bank stop-gap measure
* Lira heading for weakest close since October
* Turkey's dollar bonds also fall
* Turkish finance minister blames speculators
(Adds finance minister's comments)
By Ezgi Erkoyun and Ece Toksabay
ISTANBUL, March 22 (Reuters) - Turkey's lira plunged more
than 4 percent against the U.S. dollar on Friday, its biggest
one-day fall since a currency crisis took hold in August,
raising concerns that Turks are buying more foreign cash as ties
with Washington deteriorate.
The 2018 crisis, which tipped the economy into recession,
was echoed across Turkish financial markets on Friday, with
stocks hitting their lowest levels since January.
The currency shrugged off a stop-gap decision by the central
bank to suspend one-week repo auctions in an attempt to squeeze
liquidity in the market. The average cost of funding in Turkey
saw a near record jump.
The lira was on track for its weakest close since October.
It traded at 5.69 at 1516 GMT, compared to
Thursday's close of 5.4650, after briefly hitting to 5.75.
Turkey's dollar bonds also fell across the curve.
"The market is essentially concerned that, as witnessed last
year in August, diplomatic tension could escalate quite
substantially," said Piotr Matys, emerging markets forex
strategist at Rabobank.
Turkish Finance Minister Beral Albayrak told a local
broadcaster that speculators were talking down the economy on
social media and said this was similar to what happened during
anti-government protests in 2013. He did not give examples or
Last year, the lira lost nearly 30 percent against the
dollar as investors worried about the central bank's ability to
curb inflation in the face of calls from President Tayyip
Erdogan for lower borrowing costs.
That sell-off, which tipped the economy into recession in
the fourth quarter, was exacerbated by strained ties between
Ankara and Washington over the trial of a U.S. evangelical
pastor in Turkey.
Since the crisis, foreign exchange held by Turkish local
individuals has edged higher and hit a record in the week to
March 15, data from the central bank showed, signalling aversion
to the local currency.
Friday's lira tumble was set off when Erdogan said U.S.
President Donald Trump's move to recognise Israeli sovereignty
over the disputed Golan Heights area it captured from Syria in
1967 had brought the region to the brink of a new crisis.
Erdogan's comment revived worries about a possible worsening
of ties between the NATO allies, already under strain because of
Turkey's purchase of Russian S-400 missile defence systems.
The central bank's repo suspension only briefly halted the
selloff. Traders said the move would increase the average cost
of funding by a minimum of 150 basis points from 24 percent now,
and should improve the bank's credibility in the face of
concerns it could prematurely loosen monetary policy.
TURKS DUMPING LIRA
The lira hit a record low of 7.24 against the dollar in
August, when its steep decline put other emerging markets on
edge. The crisis boosted inflation to a 15-year high and
prompted the central bank to hike its key interest rate to 24
percent, where it remains.
The main Istanbul bourse index BIST 100 closed down
3.5 percent on Friday after its banking index plunged
The lira sell-off was due to the foreign-currency demand of
the residents of Turkey, Tim Ash said, an emerging markets
senior sovereign strategist at Bluebay Asset Management.
"The Turkish authorities need to move fast to stop the one
way dollarisation trend. If locals don't believe in their own
currency why should foreigners?" Ash said, adding the central
bank could have taken even more aggressive actions on Friday.
Turkey's dollar bonds also slid following Erdogan's
comments, with the 2043 issue tumbling more than 2 cents to its
lowest since mid-January, according to Tradeweb data. The cost
of insuring exposure to Turkey's sovereign debt rose to the
highest level since mid-January.
(Additional reporting by Tuvan Gumrukcu in Ankara, Ali
Kucukgocmen in Istanbul, and Karin Strohecker and Tom Arnold in
Editing by Sarah Dadouch and Edmund Blair)
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