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Turkey crisis: central bank action fails to quell contagion fears

Monday - 13/08/2018 09:13
Euro falls to one-year low as investors worry lira’s crash could infect European markets
A money changer counts Turkish lira at an exchange office in Istanbul. It has fallen 40% this year. Photograph: Yasin Akgul/AFP/Getty Images
A money changer counts Turkish lira at an exchange office in Istanbul. It has fallen 40% this year. Photograph: Yasin Akgul/AFP/Getty Images

Turkey’s central bank has acted to stem the lira’s crash but the intervention was not enough to quell investors’ fears that the country’s financial crisis could spread to European markets.

The lira pulled back from a fresh record low overnight after the central bank pledged to provide liquidity and cut lira and foreign currency reserve requirements – a cash buffer – for Turkish banks. The euro was also trading at a one-year low.

However, the lira weakened again to 6.9 to the US dollar after the Turkish president, Recep Tayyip Erdoğan, claimed the US was trying to stab Turkey in the back.

Addressing Turkish ambassadors in Ankara, Erdoğan said his country was under an economic “siege” but would overcome the “attack” on its economy. He insisted that Turkey’s economy remained strong and said the lira would soon settle “at the most reasonable level”.

The Turkish authorities launched investigations into hundreds of social media accounts for alleged reports they claimed were aiding the currency’s plunge.

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