The lira extended its drop to a record low against the dollar and stocks slid after the Turkish central bank’s first unscheduled intevention in more than two years failed to stem the currency’s decline yesterday.
The currency plunged to a record 2.3360 per dollar before trading 1.6 percent lower at 2.3283 as of 6:03 p.m. in Istanbul. The Borsa Istanbul 100 Index lost 1.5 percent to 64,427.52, the lowest close since Dec. 27. Two-year bond yields rose 48 basis points to 10.97 percent, increasing for a fifth day in the biggest gain across emerging markets.
Turkey’s central bank sold between $3.5 billion to $4 billion yesterday to shore up the lira, according to Istanbul-based brokerage Strateji Menkul Degerler. The regulator said “unhealthy price formations” prompted the intervention as the currency extended its longest rout since 2001. The nation has kept rates unchanged since August, favoring tighter funding costs for banks and daily dollar sale auctions, with a minimum $100 million on offer today.
“The aim was to inject a ‘shock and awe’ effect into the market by making the intervention process less predictable,” Manik Narain, a currency strategist at UBS AG in London, said in an e-mailed note. “But the results were rather embarrassing.”
Turkey’s currency is the world’s worst performer following the Argentinian peso in the past month after an anti-corruption probe into the government spiraled into a political crisis and forced three ministers to resign.
“Direct interventions have made things worse,” Burak Cetinceker, an Istanbul-based portfolio manager at Strateji Menkul Degerler AS, said in an e-mail. “This shows demand for dollars is not a speculative attack, but from real money investors.”
Gross foreign-exchange reserves at the central bank fell to $106.9 billion yesterday, the lowest since Sept. 20, the regulator’s data show. Russia holds $480 billion, while Brazil has $375 billion, according to figures compiled by Bloomberg.
“Exchange rates have come to the levels the central bank really does not want to see,” Emre Balkeser, head of trading at Garanti Securities in Istanbul, said in an e-mail. Reduced appetite for emerging-market assets is also weighing on the lira, he said.