Turkey: Lira rebounds against $, sinking below 3 lira

ANKARA

The Turkish lira rebounded Wednesday morning, reaching below 3 per dollar following talks between Russian President Vladimir Putin and Turkish President Recep Tayyip Erdogan in St. Petersburg on Tuesday.

The Turkish lira-per-dollar-rate Wednesday morning went down to 2.9623.

The lira was also supported by the Turkish Central Bank's decision to cut Turkish lira-required reserve rates for all maturities by 50 base points, which implies the release of extra liquidity into the financial system, and the government’s intention to reduce loan interest rates by cutting the banks’ funding costs.

At their meeting, Erdogan and Putin said Turkish-Russian economic and political ties would be strengthened to become stronger and more resilient. They also revived economic plans and sought policies for the Syrian conflict.

According to analysts, the optimistic atmosphere generated by the restoration of Turkish-Russian relations – following a crisis last November – and its effects on the real economy will gain ground in the weeks to come and also help the Turkish lira's recovery against the dollar.

"Global rating agency Moody’s decision to avoid issuing a statement about Turkey's credit rating on Aug. 4 as well as the reset relationship between Russia and Turkey reduced the country's risk premium," Erol Gurcan, research specialist at Gedik Investment, told Anadolu Agency on Wednesday.

Gurcan said that the Central Bank's decision to cut Turkish lira-required reserve rates for extra liquidity and the Capital Markets Board's (SPK) decision to change the rules of the share back program on Borsa Istanbul also eased domestic market fears.

The local fixed-income markets were relatively flat. The two-year benchmark bond ended at 9.24 percent, unchanged from its previous close.