Foreign currency sales reached about $6 billion amid renewed pressure on the Turkish lira, according to Bloomberg data.
Bloomberg reports that the stock market also reacted negatively to the court decision related to opposition politician and former mayor of Istanbul Yekrem Imamoglu. The scale of the sell-off was so serious that it led to an automatic trading halt.
Investors perceived the situation as a signal of increased political tension before the future electoral processes in the country.
Against this background, risk indicators deteriorated: the cost of Turkey’s 5-year credit default swaps rose by 12 basis points to 253 basis points. This indicates growing investor concern about the country’s macroeconomic prospects.
Amid growing demand for foreign currency, the Central Bank of Turkey was forced to step up sales of reserves to stabilize the lira exchange rate. According to Bloomberg estimates, the volume of interventions for one day alone could reach about $6 billion.
The broader context is also important for the markets: after several years of unconventional monetary policy, the Turkish authorities are trying to restore the confidence of foreign investors and stabilize inflation. New political turmoil could complicate this process.
