Central bank tries to contain Turkish currency crisis

Associated Press

ANKARA, Turkey

Turkey’s central bank announced a series of measures Monday to free up cash for banks as the country grapples with a currency crisis sparked by concerns over President Recep Tayyip Erdogan’s economic policies and a trade and diplomatic dispute with the United States.

The Turkish lira has nosedived over the past week, tumbling another 7 percent Monday as the central bank’s measures failed to restore investor confidence.

On Sunday it hit a record-low of 7.23 per dollar after Erdogan showed no sign of backing down in the standoff against the U.S. and ruled out the possibility of higher interest rates economists say are needed to stabilize the currency. He also threatened to seek new alliances and partners and warned of drastic measures if businesses withdraw foreign currency from banks.

The lira recovered some of its losses after Berat Albayrak, the country’s finance chief – and Erdogan’s son-in-law – said the government had readied an “action plan” to ease market concerns, without elaborating, and the government had no plans to seize foreign-currency deposits or convert deposits to the Turkish lira.

Monday’s moves to to “provide all the liquidity the banks need” are meant to grease the financial system, ease any worries about trouble at banks and keep them providing loans to people and businesses.

A credit crunch, a lack of daily liquidity, can cause a bank to collapse.

The dispute with the U.S. has centered on the continued detention of an American pastor on trial for espionage and terror-related charges. The U.S. responded with financial sanctions on two ministers and later doubled steel and aluminum tariffs on Turkey.