As Turkey's lira sinks further central bank doubles borrowing limits for banks

A dispute between Ankara and the US has exacerbated the depreciation of the currency

People look at foreign exchange rates in Ankara, Turkey, on August 28, 2018. (Photo by ADEM ALTAN / AFP)
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The Turkish lira weakened further on Wednesday owing to uncertainty about any progress regarding the rift between Turkey and the United States.

The lira was trading at 6.3 to the dollar at 5.37am GMT, compared with Tuesday's close of 6.2625. The currency has lost about 40 per cent of its value against the dollar this year because of a sell-off accelerated by a row with Washington over an American evangelical Christian pastor detained in Turkey on terrorism charges.

The lira began to weaken rapidly amid concerns over Turkish President Tayyip Erdogan’s influence on monetary policy, but was driven to record lows over the dispute between the US and Ankara, with Washington slapping tariffs on some Turkish imports.


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Turkey’s central bank said on Wednesday it was doubling banks’ borrowing limits for overnight transactions from levels which applied before August 13, when it said it would provide all liquidity the banks needed.

"In the light of recent evaluations, the CBRT has decided that, to be effective from August 29, 2018, the banks' borrowing limits for overnight transactions at the Interbank Money Market established within the CBRT would be twice the limits applicable before August 13," it said.

This month, US President Donald Trump authorised a doubling of duties on aluminium and steel imported from Turkey, triggering retaliatory measures from Ankara.

Investors are also worried by a US Treasury investigation into state-owned Turkish lender Halkbank, which could face a potentially hefty fine over allegations of busting sanctions on Iran. The bank has said all its transactions were legal.

Turkey and the US are also at odds over their diverging interests in Syria and US objections to Ankara's plan to buy Russian defence systems.