Turkish lira continues its fall as country’s foreign reserves dwindle
The Turkish lira continued its slide today following the news that the country’s foreign reserves fell in March and lukewarm reaction to its new economic plan.
Read more: Turkish lira falls against dollar as US suspends fighter jet delivery
The lira fell 0.8 per cent against the dollar today, meaning the dollar bought 5.777 lira. The Turkish currency has fallen three per cent since last Friday.
Yesterday figures from the Turkish central bank revealed that its net international reserves had fallen to $27.9bn (£21.4bn) as of 5 April, compared to $29.7bn a week earlier. This caused lira to fall 1.2 per cent against the dollar.
On Wednesday Turkey’s finance minister unveiled an economic reform plan centred around recapitalising the country’s state banks to the tune of 28bn lira ($4.9bn). The plans received a tepid reaction from markets, however, and the lira stayed flat.
The falling foreign reserves added to speculation that the central bank may be attempting to halt the decline of lira using the money.
Last year the country was hit by a currency crisis that saw lira fall 30 per cent against the dollar after the country’s relations with the US soured.
In March and April of this year the currency has been under pressure as tensions with the US have risen, emerging markets have come under pressure, and local election results have been disputed, adding to political uncertainty.
Economists at Capital Economics said: “Concerns that the central bank has been burning through its limited FX [foreign exchange] reserves kept the lira under pressure.”
Read more: Overnight Turkish lira lending rate surges to 400 per cent
However, they said: “Turkey’s current account figures published on Thursday showed a narrower-than-expected deficit in February.”