Türkiye’s central bank burnt through almost $12 billion defending the lira in a record intervention after President Recep Tayyip Erdogan’s detention of his political rival triggered a political crisis that scared investors and sent the currency reeling.
The bank spent $11.5 billion propping up the currency on Wednesday after the detention of Istanbul’s mayor, Ekrem Imamoglu, the most prominent leader in Türkiye’s political opposition, said a person with knowledge of the matter and calculations based on official data by Burumcekci Research and Consultancy, the Financial Times reported.
It said the intervention was nearly four times larger than any previous such move on the bank’s official records.
It came after the lira plunged as much as 11% against the US dollar to a record low on Wednesday as Erdogan’s move against Imamoglu ignited a stampede out of the Turkish markets.
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One Turkish banker told the Financial Times that the officials had “lost control” of the market early on Wednesday, adding it had “left a scar” on investors’ confidence.
JPMorgan Chase, a significant player in emerging market finance, also noted “lira liquidity was impaired amid large outflows” on Wednesday.
Analysts say the central bank likely continued intervening in the market on Thursday and Friday. Policymakers have taken other steps to soothe markets this week, including holding an emergency central bank meeting on Thursday in which a key overnight interest rate was increased in an attempt to keep local savers in lira accounts rather than switching to dollars.
The actions have eased the lira’s decline, leaving the currency down 3% for the week, though Istanbul’s Bist 100 share index tumbled almost 8 percent on Friday in its worst week since 2008.
On Sunday, Bloomberg said Turkish central bank officials held a “technical meeting” with commercial lenders to prepare for potential market volatility after a key opposition politician was formally arrested.
The meeting discussed “the latest developments in markets,” according to a statement from the Turkish Banks Association.
