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Turkey's Central Bank Unexpectedly Tightens Stance on Weak Lira

Turkey's Central Bank Unexpectedly Tightens Stance on Weak Lira

(Bloomberg) -- Turkey’s central bank unexpectedly tightened its monetary stance after the lira weakened, leading a retreat among emerging-market peers.

The bank is suspending one-week repo auctions for an unspecified period “considering the developments in financial markets," it said Friday in a statement on its website.

The announcement comes less than a year after the central bank said it would use one-week repos as its main funding tool, abandoning an older framework that allowed the institution to adjust daily the cost of cash provided to banks.

Currently, the central bank has two other instruments reserved for emergency lending, but it didn’t say which one it would use. Interest rates for overnight lending and the late liquidity window stand at 25.5 percent and 27 percent, respectively. The rate for the suspended repo auctions was 24 percent.

The lira briefly trimmed its losses following the bank’s statement before weakening anew. The currency was trading 2 percent lower at 5.5786 per dollar at 4:26 p.m. in Istanbul after falling as much as 2.5 percent.

To contact the reporter on this story: Onur Ant in Istanbul at oant@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Constantine Courcoulas, Paul Sillitoe

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