Turkish lira falls despite bank action

Turkish liras counted at an Istanbul stock-exchange office Ankara – Arab Today The Turkish lira fell further against the dollar on Wednesday, despite assurances by the central bank and amid tension over Syria. The lira fell to 2.06 to the dollar in initial trading, then rallied slightly to 2.0527, from 2.0382 at Tuesday\'s close. The Istanbul stock market fell by 1.52 percent, having already dropped by 4.73 percent at Tuesday\'s close, 1.24 percent on Monday and by 6.0 percent last week. Assurances from the head of the central bank Erdem Basci that the lira could rally to 1.92 to the dollar, or even stronger, at the end of this year did not convince the markets. After Basci\'s comments, the dollar surged over 2.03 percent. However, the yield on 10-year government borrowing bonds went down and ended the day at 9.82 percent. The yield on 10-year government bonds surged to 10.58 percent last week on the secondary market. The prospect of war in neighbouring Syria is also weighing on sentiment. Foreign Minister Ahmet Davutoglu said in remarks published on Monday that Turkey would join an international coalition against Syria even if the UN Security Council failed to reach a consensus. On Tuesday, Basci ruled out any increases in interest rates but signalled that the bank would take bold action to defend the lira by using its official reserves. It has said that the bank has a war chest of about $40 billion, and it is estimated that previously that bank has spent at least $8.0 billion in attempts to support the lira. He said that the pressure on lira was temporary, giving clear signs that the bank would defend the currency aggressively, according to analysts. Turkey is being battered by an exodus of capital from emerging economies in Asia, Latin America, Russia and South Africa as investors pull out some funds after signals of a tightening of US monetary policy. But analysts say its economy is fragile because its dependence on credit and worrying deficit on the balance of payments on current account. Source: AFP