ISTANBUL (Reuters) - Turkey’s lira pulled back from a record low of 7.24 to the dollar on Monday after the central bank pledged to provide liquidity and cut reserve requirements for Turkish banks, but its meltdown continued to rattle global markets.
FILE PHOTO: Turkish Lira banknotes are seen in this October 10, 2017 picture illustration. REUTERS/Murad Sezer/File Photo
The currency has lost more than 40 percent against the dollar this year, largely over worries about President Tayyip Erdogan’s influence over the economy, his repeated calls for lower interest rates, and worsening ties with the United States.
On Friday that relentless slide turned into a crash: the lira dropped as much as 18 percent, hitting U.S. and European stocks as investors took fright over banks’ exposure to Turkey.
The fresh lira collapse on Sunday night hit Asian shares, weakened the South African rand and drove demand in global markets for safe currencies including the dollar, Swiss franc and yen. Shares in Europe’s major banks also lost ground.
The central bank, which surprised markets last month when it left interest rates unchanged despite double-digit inflation and the tumbling lira, announced the moves on liquidity and reserves after Finance Minister Berat Albayrak said authorities would start implementing an economic action plan on Monday.
The bank cut the lira reserve requirement ratio, a cash buffer held by banks, by 250 basis points for all maturity brackets and lowered reserve requirement ratios for non-core FX liabilities by 400 bps for maturities up to three years.
The moves will free up 10 billion lira, $6 billion, and $3 billion equivalent of gold liquidity in the financial system, the bank said. It also pledged to provide “all the liquidity banks need”.
While the measures should ease worries over financial stability,
