Turkey’s central bank launches “rescue measures” as the lira slides

Turkey’s central bank on Monday announced it was taking all necessary measures to ensure financial stability after the collapse of the lira, promising to provide “all the liquidity the banks need”.

The Turkish currency reached a new record low of 7.24 against the US dollar in Asia Pacific trade when markets opened on Monday morning. The lira pared some of its losses after the central bank’s announcement, but it was still down more than seven percent on the day.

The currency has lost more than 45 percent of its value this year.

Worries about President Recep Tayyip Erdogan’s influence over the economy, including his repeated calls for low interest rates in the face of high inflation, and Turkey’s worsening ties with the United States have contributed to the steep decline.

“The central bank will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary,” the bank said in a statement.

Investors fear the lira’s sell-off could have a ripple effect in global financial markets with the euro, the South African rand, and Mexico’s peso already dented by Turkey’s crisis.

“Clearly Turkey’s situation is another global risk,” said Konstantinos Anthis, head of research at ADS Securities.

“Even though the country itself has limited ties with the rest of the world, a spreading of the crisis to Europe via its banks’ exposure is a major concern.”