People check rates at a currency exchange office in Istanbul yesterday. Turkish shares fell as much as 4% and bond yields jumped as a plunge in the Russian rouble sent investors stampeding out of emerging markets. A row between Ankara and the European Union also weighed on sentiment.

Reuters

The Turkish central bank said yesterday it would meet some of the foreign exchange needs of state energy importers, stepping in to support the lira as it tumbled to a record low amid a major selloff in emerging markets.

Turkish shares fell as much as 4% and bond yields jumped as a plunge in the Russian rouble sent investors stampeding out of emerging markets. A row between Ankara and the European Union also weighed on sentiment.

The economy minister said he did not believe a “strong intervention” was needed to prop up the lira. But the central bank moved to ease dollar demand, saying it and the treasury would cover some of the forex needs of state energy buyers.

Turkey depends on imports for almost all of its natural gas needs. State pipeline operator Botas buys gas in dollars under long-term supply deals while selling to consumers in lira at a discount, making the company a frequent buyer of forex.

The central bank’s move, which takes effect on December 17, eased some pressure on the lira, which recovered slightly to 2.3690 against the dollar by 1330 GMT from a record low of 2.4140 in earlier trade.

The Istanbul stock index was down 3.53% at 79,878.82 points, underperforming a 1.2% fall in the emerging market index.

“The source of the move is Russia, with the country’s markets experiencing a deep depression,” said Eral Karayazici, domestic sales manager at brokerage Gedik Investment.

Investor sentiment towards Turkey has also soured after Sunday’s arrests of media executives from outlets critical of the government. President Tayyip Erdogan on Monday rejected EU criticism over the arrests and signalled more raids could come.

The arrests marked an escalation in Erdogan’s battle with US-based cleric Fethullah Gulen, with whom he has been in open conflict since a graft investigation targeting his inner circle emerged a year ago.

Other emerging market currencies also tumbled against the dollar, fuelled by massive price falls in commodity and credit markets. Russia tried to shore up the rouble with a massive interest rate hike overnight.

Turkey’s 10-year benchmark bond yield rose to 8.63% from 8.39% on Monday.

 

 

 

Related Story