Turkish assets tumble, lira hits 28-month low against the U.S. dollar
Güncelleme Tarihi:
The Turkish lira fell to a 28-month low, while bond yields rose to a four-year high on Thursday, as worries over the economic outlook and growing global risk aversion undermined market confidence. (UPDATED)
The lira eased more than 4 percent in afternoon trade and traded at 1.70 levels against the dollar from its Wednesday interbank bank close of 1.63. The lira touched its lowest above1.73 levels in the day where the loss was more than 6 percent. The currency has lost around a quarter of its value against the U.S. dollar this month as investors and hedge funds have been selling their assets and demanding U.S. dollar while leaving the emerging market.Foreign investors' dollar demand continues and the fall in the lira will persist until panic dollar purchases end, Ozcan Gecer, treasury manager at Istanbul based Ata brokerage told HotNewsTurkey."The movement of the dollar price, which jumped over 1.70 levels after falling below this level a couple times, shows that the trend for lira is still down. However these 1.70 levels are both critical and psychological limits for investors. We expect lira's to reverse its course," he said.The yield on the benchmark June 23, 2010, rose more than 2 percent and closed at 23.62 percent after easing from its highest level in four years above 24.00 percent during the trading day.The benchmark Istanbul Stock Exchange index which lost 2.64 percent at the close of the morning session, recovered slightly and closed the day at 25,040.81 point with 2.38 loss. The stocks have lost more than half of its value this year amid the mounting global risk aversion. CB DOUBLES FX BORROWING LIMIT
Central Bank Governor Durmus Yilmaz said the bank will double borrowing limits in the forex depot market to $10.8 billion starting from Friday and said that there was no problem with foreign exchange liquidity.
Gecer also said the recent measures taken by the central bank were positive but will not be very effective in times of panic in the markets. The bank should intervene by selling dollars if it surges to 1.74 levels, he added.
"The central bank is not brave enough to meet the dollar demand of hedge funds," he also said.
Global stocks also fell on fears of a recession. Asian stocks fell to a 4-year low on Thursday on growing fears that emerging market weakness would prolong a global recession and depress corporate earnings, pushing the yen to a 6-year high against the euro.
U.S. stock futures pointed to another bad day on Wall Street after shares dropped to a five-year low on Wednesday, hit by weak corporate earnings.
GOVERNMENT'S MEASURES Markets were eyeing the possibility of additional steps from the government and central bank to stabilize markets and prop up investor sentiment. Finance Minister Kemal Unakitan said Turkey would introduce ceilings on the budget deficit and the public debt stock to protect the country from the financial crisis.
He said the government will keep a 10 percent withholding tax on local bond investors' earnings but remove it for equities to help the country weather the financial crisis.
Foreign investors are exempt from withholding tax on bonds, bills and equities.