Turkish lira crisis gets worse with fresh 11% plunge

A Kuwaiti man holds a one US dollar bill next to a five Turkish lira banknote at a currency exchange

The dispute between the two North Atlantic Treaty Organisation allies - which reached new intensity over the detention of an American pastor in Turkey - has hammered the lira and also raised questions over the future partnership between Washington and Ankara.

He said the country's banks and banking regulator "will take the necessary measures quickly".

Investors are waiting for "a convincing response from the central bank and government", Rob Carnell, an economist at investment bank ING, said in a note to clients Monday.

Deutsche Bank was down 2.5 percent Monday after Bank of America Merrill Lynch downgraded the stock, citing its heavy exposure to Turkey.

The lira did find a sliver of support when Turkey's central bank said it had lowered reserve requirement ratios for banks. However the statement gave no clear promise of rate hikes, which is what most economists and analysts say is needed to ease the crisis.

"As of Monday morning, our institutions will take the necessary actions and will share the necessary announcements with markets", Albayrak was quoted as saying while adding that the plan would centre on "the state of our banks and the small and medium size enterprises" most affected by the lira's plunge. As of 0740 GMT, the turbulent unit had recouped much of its losses to be 3.27 percent weaker at 14.5400.

In an interview with the newspaper Hurriyet, treasury and finance minister Berat Albayrak also said the government had no plans to seize foreign currency deposits or convert deposits to the Turkish lira.

Erdogan mentioned the deadline in comments he made Sunday to his supporters in Trabzon, according to Reuters. "With God's permission we will overcome this", he added.

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Turkey on Monday accused the U.S. of "stabbing it in the back" as the country's economic woes failed to stop market turmoil amid a deepening diplomatic spat with Washington.

Erdogan said his country would begin to seek new partners, following what he described as a "political plot" against Ankara. The Singapore dollar and Malaysia ringgit slipped while demand for safe haven assets such as the United States dollar, Japanese yen and Swiss franc jumped as the risk-off investing mode heightened.

As the crisis deepened at the end of last week, the lira and the Turkish stock market slid sharply.

Asian currencies were also hit by the downdraft with India's rupee dropping to a new record, while the Indonesian rupiah slumped 0.8 percent.

European markets closed lower yesterday: London's FTSE lost 0.3 per cent, Paris was down slightly, 0.04 per cent and Frankfurt closed 0.5 per cent lower.

Following the central bank's promises on Monday, the lira pulled back from a record low of 7.24 against the dollar, strengthening to 6.4, before weakening again to 6.92. Meanwhile, inflation has hit 15 per cent.

The Shanghai composite index was 1.2 down per cent at the close of the ASX as the Chinese yuan hot a fresh one-year low as Chinese investors reassessed the White House determination to institute trade tariffs.

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