In a bid to halt the lira’s plunge, the Turkish central bank lowered the FX reserve requirement on Monday from 45% down to 40%:
“With this revision, approximately $2.2 billion of liquidity will be provided to banks.,” said Turkey’s central bank.
While the unexpected news caught currency traders off guard, briefly halting the sell-off, the lira’s plunge accelerated following the announcement.
So far today, the lira is down 3.8% against the U.S. dollar, trading at a new all-time low of 5.28 lira to the dollar:
Investor confidence in Turkey's economy and currency has deteriorated significantly since the re-election President Erdogan, who has repeatedly called on the central bank to maintain low interest rates, despite surging inflation, declining economic output and rising import prices.
In its last release on July 31, Turkey's central bank revised its 2018 inflation forecast from 8.4% to a whopping 13.4%.
Lira photo credit: 1
