The Turkish lira tumbled to a record low on Thursday, despite efforts by the central bank to reassure investors that the country’s economy is recovering from the coronavirus pandemic, The Financial Times reported.
The currency burst through previous lows set in May of this year and in a crisis that took hold in the summer of 2018 to reach TL7.3079 against the dollar, buckling after authorities had succeeded in propping up the lira earlier this year with huge sales of its dwindling foreign-currency reserves.
The 3.6 percent decline to the lowest point of the day marked a second day of intense selling after signs of dysfunction in the country’s money markets this week, prompting investors and analysts to speculate whether the central bank may need to raise interest rates to inject some stability. Stocks also fell by more than 5 percent in the heaviest fall since mid-March.
After hours of declines in the currency on Thursday, the central bank issued a statement saying that the country’s “economic recovery has gained pace.” It added that “price developments in the markets are being closely monitored” and that it “stands ready” to take action. The currency dipped further after the statement before picking up slightly.
Through most of June and July, Turkish authorities pinned the dollar to just under TL6.85, even while the lira tumbled against other currencies. Goldman Sachs estimates that to do this, the central bank spent $65 billion of its foreign currency reserves in the first six months of the year, far beyond the $40 billion that it spent in the whole of last year.