Turkey

Turkey’s lira dipped to its weakest level in more than two weeks on Thursday on concerns over the country’s dwindling net reserves, with disappointment over an economic reform plan and local election uncertainty also weighing on sentiment, Reuters reported. The lira weakened 1.2 percent to 5.75 against the dollar on Thursday after the central bank’s international net reserves fell to $27.94 billion as of April 5, from $29.72 billion a week earlier. Analysts say Turks converting their savings into foreign currencies have signaled a decline of confidence in the lira.

Turkey’s biggest financial pledge in 18 years to bolster its banks may not be the silver bullet needed to pull the Middle East’s largest economy out of recession, Bloomberg News reported. The government plans to inject fresh capital into state-owned lenders and oversee the formation of two funds to take on some of the sector’s bad loans, Treasury and Finance Minister Berat Albayrak told reporters in Istanbul. To back the effort, the government will issue 28 billion liras ($4.9 billion) of bonds and place them at state banks.

The global economy has slowed sharply since last summer and will rely on a “precarious” boost from a few emerging markets to reverse the loss of momentum, the IMF has predicted in its latest economic forecast, the Financial Times reported. Cutting its outlook for 2019 and 2020, the fund judged that advanced economies would “continue to slow gradually” into next year while emerging economies would play a more positive role, led by an end to crisis conditions in Turkey and Argentina and stabilisation in the all-important Chinese growth rate.

Turkey plans to shore up its battered banks by injecting capital into the biggest state-owned lenders for the second time in six months, according to people with direct knowledge of the matter, Bloomberg News reported. Seeking to sustain the flow of credit into the slumping economy, the treasury is considering buying bonds that will be issued mostly by TC Ziraat Bankasi AS and Turkiye Halk Bankasi AS, said the people, who asked not to be identified because the talks are internal. The blueprint is likely to be announced by Treasury and Finance Minister Berat Albayrak on Wednesday.

Turkish companies are struggling to get off the hamster wheel of debt as foreign borrowings run near record highs, Bloomberg News reported. The reason: a plunge in the lira that has driven up the cost of their obligations in dollars and euros. Banks are being left to carry the burden amid a surge in demand from some of the country’s industrial giants to restructure their liabilities -- on top of a jump in bad loans. Lenders are also pulling back on providing new credit as the financial system comes under increasing pressure from the recession and an inflation rate of almost 20 percent.

Turmoil has ripped through Turkish financial markets in recent weeks, reprising the fear and volatility that sent the country’s economy into a tailspin and its currency into crisis last summer, The Wall Street Journal reported. Only limited progress has been made since then to shore up the country’s finances. And wary international investors have balked at signs that Turkey’s president, Recep Tayyip Erdogan, is returning to his unorthodox economic playbook. His party’s losses in key local elections this weekend add more uncertainty to the mix.

The Turkish lira resumed declines on Thursday even as the nation orchestrated a currency crunch to stem the currency’s losses days before an election that will test support for President Recep Tayyip Erdogan’s rule, Bloomberg News reported. Investors dumped bonds and stocks on Wednesday and the cost of borrowing liras overnight on the offshore swap market soared past 1,000 percent because local banks are under pressure not to provide liquidity to foreign fund managers who want to bet against the lira. A government official said the measures are temporary.

The latest ructions in Turkish money markets are prompting fears that the country could be heading for another serious bout of currency weakness, echoing last summer’s lira crisis that has left deep scars on the economy, the Financial Times reported. Foreign investors were effectively frozen out of selling the lira on Wednesday after the overnight offshore swap rate more than tripled to 1,200 per cent, with analysts saying banks had been ordered not to lend to foreign counterparties — a claim that the Turkish Banking Association has denied.

The cost of insuring exposure to Turkey’s sovereign debt soared to a six-month high on Monday, after the country’s financial regulators opened probes into JP Morgan and other banks accusing them of providing misinformation that stoked FX volatility, Reuters reported. Turkey 5-year credit default swaps (CDS) jumped by 27 basis points (bps) to 426 bpd - levels last seen in September in the wake of the summer selloff, data from IHS Markit showed.

The financial woes of Dogus Holding AS are only getting worse even as the Turkish owner of the Salt Bae steakhouse chain goes on a selling spree to help restructure debt, Bloomberg News reported. The Istanbul-based investment-holding group, controlled by Turkish billionaire Ferit Sahenk, has been disposing mainly of hotels over the past year as part of a December agreement with lenders to renegotiate the terms on $2.5 billion of debt.