PanARMENIAN.Net
Turkish Central Bank lets lira float
10.03.2009 11:02 GMT+04:00
/PanARMENIAN.Net/ The Turkish lira rose back to 1.81 levels after
hitting all-time low against the dollar as the central bank stepped in
to curb the depreciation of the currency.
The Turkish lira currency fell more than 1 percent to hit historic
lows over 1.82 levels against the dollar on Monday. The lira
strengthened back to 1.81 levels after the central bank said it will
re-launch daily dollar selling auctions from Tuesday.
The Turkish lira also plunged last week by the most in almost five
months as risk aversion sparked by concerns in global markets
continued to lead investors to seek safer ports.
The Turkish Economy Minister said on Monday that the weakening lira
was due to the impact of the global crisis. "There is general shift
away from risk which is strengthening the dollar in every corner of
the globe," Mehmet Simsek was quoted as saying by Dogan News Agency.
The lira, having lost some 25 percent against dollar in 2008, has
further weakened more 15 percent since the beginning of 2009.
Analysts say the Turkish Central Bank’s reactions are going to be
important during this period to calm the rising money markets. "The
bank can lower required reserve ratio for foreign currency
accounts. It did this before," Murat Salar, an economist at
Istanbul-based A Brokerage, told hurriyet.com.tr.
The bank is unlikely to employ any other methods to intervene, Salar
said adding that the current foreign currency level makes the
long-awaited loan deal with the International Monetary Fund (IMF) more
important.
The currency’s weakening position is likely to deepen concerns about
Turkey’s economy as the government continues to hold out against
finalizing a new loan arrangement with IMF, saying some conditions
attached to the loan are unacceptable. Talks for a possible new loan
were suspended in February.
Prime Minister Tayyip Erdogan said on March 2 that Turkey does not
need loans from the IMF and may not conclude talks on a possible
economic agreement until after the local elections on March 29. The
country, which is seeking to avert a recession, has external financing
needs of about $30 billion this year, according to the central bank’s
estimation.
Turkey’s gross domestic product expanded 0.5 percent in the third
quarter of the year, its slowest pace in six years, after growing 2.3
percent in the second three months.
Problems which have occurred in international credit markets caused
liquidity problems in several countries as of the second half of
September 2008 and the bank has taken some measures to diminish
negative impacts on the credit mechanism in the country, the bank said
in the statement.
The auctions will start on Tuesday and the daily volume to be sold
will be $50 million. The amount could rise depending on market
conditions, the statement also said.
The statement came after lira hit a record low of 1.82 against the
dollar, in addition to the rapid slide experienced last week.
"Moreover, if the dollar selling auctions will not be able to meet the
liquidity need in the foreign exchange markets and if high volatility
is observed as a result of speculative moves that may result from the
reduction in liquidity despite the auctions, then the Central Bank
could intervene by introducing direct dollar selling," the bank added
in the statement.
The Turkish Central Bank earlier took a series of measures when the
liquidity squeeze experienced in the markets was felt more intensely
in the last quarter of 2008. At that time, the bank resumed the
foreign exchange depot market, in which it is the financial
intermediary and regulator, and doubled the borrowing limit in this
market.
The central bank also said that the decision to provide liquidity
loans to banks, up to double their total equity, was considered as
plan B.
Earlier, on March 3, 2009, the Central Bank of Armenia announced
return to floating rate policy. According to experts, the
dram-to-dollar rate is expected to be AMD360-380/$1.