The Turkish lira has fallen nearly 9% in early trading on Monday because investors fear the country’s financial crisis might spread to European markets.
Turkey entered a full-blown financial meltdown on Friday, sending tremors through global markets, after President Recep Tayyip Erdogan declared his refusal to bow to U.S. political demands and market pressures.
Though Turkish president Recep Tayyip Erdoğan had defiant words over the weekend pledging as yet unspecified action to reverse the slide, the currency stood at 7 lira to the US dollar at 3.30amBST on Monday, a fall of 9% on Friday’s closing price.
Earlier it had declined to an all-time low of 7.24 before recovering some ground following the country’s banking regulator announced late on Sunday night that it would limit swap transactions on the battered currency.
Stock markets of Asia were also down on Monday. The Nikkei in Japan was off 1.2%, Hong Kong lost 1.2%, Sydney was down 0.5% and the Taiwanese bourse fell 2%.
The lira has tumbled at least 40% current year on worries about Erdoğan’s increasing control over the economy and subsiding relations with the United States, mainly over the issue of war in Syria.
In Australia analysts at ANZ bank stated contagion risks centre on Spanish, Italian and French banks revealed to Turkish debt, as well as Argentina and South Africa.
“Turkey’s massive pile of corporate debt denominated in foreign currencies, but a rapidly sliding currency – and inflation that’s threatening to go exponential – is a toxic combination.”
> Shiuly Rina
