Turkey acts to curb currency crisis

Reuters

In turkey, the central bank has said it is ready to take “all necessary measures” to ensure financial stability after the collapse of the lira.

It is committed to provide banks with “all the liquidity the banks need.”

The comments came after a widening diplomatic spat with the united states led to unrest in the country.

Investors were not reassured. Although the lira has increased slightly, it has still reached a new record high against the dollar and the stock markets in Europe and Asia has declined.

Before the announcement, the lira was down 9 percent before recovering slightly to a decline of 6% in late morning trade in Turkey.

Turkey’s ministry of interior said that he would take legal action against 346 social media accounts alleged that he had posted comments about the weakening lira “in a provocative”.
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The fall was worse on Friday, when US President Donald Trump has approved the doubling of tariffs on Turkish steel and aluminium in the wake of Turkey’s refusal to release an American pastor who has been in custody in Turkey for almost two years.

The Turkish President Recep Tayyip Erdogan has promised not to allow Turkey to be “brought to its knees,” and spoke of a conspiracy against the country.

What is happening on the markets?

Before the new measures were announced, japan’s Nikkei 225 had already fallen almost 2% at the end of the negotiation. News of the announcement did nothing to boost the morale of the share values and he has closed this amount.

Hong Kong’s Hang Seng index declined by nearly 1.6% in the trade of the afternoon, but the Shanghai Composite recovered from a fall of 1.7% for the trade with lots of small waterfalls in the afternoon trading.

In early trading in Europe, London, the 100-share index was down 0.5%, while the German and the French equity markets declined in the same proportions.

In Australia, the benchmark S&P/ASX 200 index declined 0.5%, while the South Korean Kospi index fell by 1.8%.

Investors in the world are worried about the damage spreading and have been encouraged to sell riskier assets, including Asian shares and currencies in emerging markets.

According to the analysts, the investors have been seeking shelter in the form of the yen and the US dollar. What is the cause of the read slide?

Experts have attributed the decline of the Turkish lira on the fears that the country is descending into an economic crisis.

In turkey, the stock market has dropped 17%, while borrowing costs have increased 18% a year. During this time, inflation reached 15%.

Investors are worried that the Turkish companies that borrowed heavily in favor of a construction boom may have difficulties to repay loans in dollars and euros, since the weakening of the lira means that there is now more to pay them back.Why Turkey and the united states to the odds?

The dispute centres of the Turkish refusal to release American pastor Andrew Brunson.

Mr. Brunson was detained for nearly two years, accused of links with the outlawed Kurdistan Workers ‘ Party and the Gulenist movement, which Turkey accuses of being responsible for the failure of a coup d’├ętat in 2016.

The Turkish president is angry that the united states has not taken more action against the Gulenist movement, and what he said was a failure to” unequivocally condemn” the 2016 coup attempt. The united states has refused to extradite Fethullah Gulen, who lives in Pennsylvania.

Getty Images

The AMERICAN support for the Kurdish rebel groups fighting the Islamic State (IS) fighters in northern Syria is another major difficulty, in view of Turkey, the fight against the insurgency in Kurdish in his own country.

Mr. Erdogan has also been moving closer to Russia. That creates an awkward triangle, given that Turkey is member of Nato, Russia, Nato is the number one threat and the organisation is obliged to defend any member that is attacked.

Nato uses the Air Base of Incirlik in Turkey to fight against the IS, and there has been internal pressure on Mr Erdogan to close it.What are the Turkish officials on this subject?

The Turkish Central Bank announced on Monday that the banks have all the cash to help keep money in motion that they needed.

But the bank did not increase interest rates, which would help contain inflation, while supporting the lira.

It is not clear if this comes after Erdogan pressure. The president is notoriously opposed to the increase in the interest rate.

He rejected the fall of the currency as “a storm in a tea cup” and asked the Turks to sell dollars and buy cry for help to boost the currency. Why is it so afraid of spread?

Investors are worried that Turkish companies could struggle to repay loans in dollars and euros debt pile, which only grows as the lira falls.

More than a third of Turkish banks ‘ loans in foreign currency, according to Reuters.

Concerns that the fall in the value of the spread have been recently highlighted by a report in the Financial Times saying that the European Central Bank is concerned about the exposure of euro area banks in Turkey.

In particular, the report highlighted that Spain’s BBVA, italy’s UniCredit and France’s BNP Paribas, which have significant operations in Turkey, are particularly vulnerable.

Eight years ago, concerns about the contagion during the european debt crisis has prompted investors to push up the borrowing costs of highly indebted euro zone countries, which aggravates their debt problems.

What is turkey’s currency crisis affecting you? Do you live in Turkey, or are you a tourist in the country? Share your experiences by sending an email to haveyoursay@bbc.co.uk.

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