Turkey’s central bank on Monday took measures to boost the liquidity in the foreign exchange market to support the Turkish lira that had fallen to a record low.
Late Sunday, Finance Minister Berat Albayrak announced a plan to clam the highly volatile financial markets. The plan is expected to be put into action later on Monday.
The Turkish lira that witnessed a free fall late last week and set a new record low of 7.24 early Monday, recovered slightly following the announcement and the central bank measures.
As of 08:16 UTC, the Turkish lira was trading at 6.81 against the US dollar.
The TCMB cut the Turkish lira reserve requirement ratios by 250 basis points for all maturity brackets and the same ratio for non-core FX liabilities by 400 basis points for the various maturities.
The central bank also raised the maximum average maintenance facility for FX liabilities to 8 percent and said the euro can be used for the maintenance against Turkish lira reserves, in addition to the US dollar.
Approximately 10 billion Turkish lira, 6 billion US dollars, and 3 billion US dollars equivalent of gold liquidity will be provided to the financial system, the bank said.
The central bank said it “will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary.”
Meanwhile, there are concerns that the Turkish lira crisis could spread to other emerging market currencies.
The Indian rupee hit a record low fell 79 paise to hit a record low 69.62 against the US dollar early Monday.