Turkey's central bank launches economic-stability plan

"It's arguably the lack of prompt, firm, and rational responses from Turkish authorities that has now sent the lira into a tailspin", said Levin.

Turkish President Recep Tayyip Erdogan has dismissed calls for the country to raise interest rates to try to ease the crisis - and has lashed out at the United States.

The lira currency, which has lost more than 40 percent against the US dollar this year, pulled back from a record low of 7.24 earlier on Monday after the central bank pledged to provide liquidity, but it remained under selling pressure and its meltdown continued to rattle global markets.

But worries over Turkey are mounting; its inflation rate is pushes higher, its current account deficit is worryingly high, and its companies may struggle to repay loans taken out in USA dollars.

The rand fell by nearly 3% on Monday against the U.S. dollar and has fallen by 9% against the greenback since the beginning of August.

The currency drop will also increase the cost of living for people in Turkey by making imports more expensive.

The single currency was last at United States dollars 1.1398, having touched its lowest since July 2017 on Monday.

Hungary, for example, has seen its currency, the forint, fall by almost 4% against the U.S. dollar since last Wednesday.

Investors are anxious that Turkish companies could struggle to repay loans in dollars and euros - a debt pile that only grows as the lira falls.

The euro zone banking equity index (.SX7E) was down 1.6 percent, hovering near its lowest level this year and falling for the fourth session in a row.

Both are also no strangers to seeing their own currencies savaged by the market.


The route of hiking rates now appears cut off to the nominally independent central bank which is ready to use virtually any policy tool save this one, raising fears Erdogan has the bank under his influence.

Indonesia's central bank was also intervening in foreign exchange markets on Monday to defend the rupiah. While tensions with the USA need to be resolved, the main problem in Turkey is "a lack of market-friendly officials that have experience with markets". "In view of the domestic political and economic conditions, it is therefore unclear whether the necessary steps will be taken to contain the market fallout".

Erdogan won a second term in office in June under a new system of government that gives him sweeping powers.

Yet the Mexican peso is down by more than 4% since last Wednesday.

The lira plunged to a fresh record low of 7.24 against the dollar during in Asia Pacific trade, where markets were opening for Monday morning.

The US dollar is the strongest it's been in more than a year, which could eventually create problems for US companies that make a lot of sales overseas.

As economists speculate on the policymakers' range of options in the face of a market meltdown, Turks are throwing in the towel on their national currency. Last Friday alone, the currency depreciated by 14 per cent.

In midday trading in Europe, London's 100-share index was down 0.6 percent, while the German and French share markets were down by 0.3 percent and 0.7 percent.

Such sell-offs are not uncommon during the summer - there was one this time last year prompted by concerns over North Korea - but investors are, nonetheless, very alert to the fact that most stock markets in western countries are now in their tenth year of the current bull run that began in March 2009.

The cycle is, in the jargon, "late stage" and so any sign of danger will be an excuse to sell assets that appear at all risky.

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