Turkish authorities ended the week of volatility in financial markets with tightening monetary policy, which helped lift the lira back from an all-time low
Turkey’s central bank on August 7 cut off financing to local lenders at its one-week buyback rate, forcing banks to borrow at a more expensive overnight window. This will result in a 150 basis point increase in the interest rate. Regulators are also preparing to lift rules that forced lenders to increase credit, according to people who asked to remain anonymous, according to Bloomberg. Turkey is also halting a campaign to support the economy by increasing demand for loans. The decline in interest rates since last year has resulted in the country’s current growth being in deficit, leading to a new spike in inflation as well as an increase in demand for foreign exchange. Against the backdrop of politics, retail investors were selling dollars and buying lira, comparing rates with the local currency. The bank regulator agreed to satisfy the requests of creditors to reduce the asset rate.
The lira jumped 1.6% to 7.1357 per dollar after earlier falling to an all-time high of 7.3662. It traded 0.7% higher at 7.1998 as of 15:21 in London. The Borsa Istanbul 100 Index dropped to 0.2%. The yield on two-year government bonds jumped 73 basis points to 12.99%.