Sharp Drop in Lira and Stock Market Decline
Largest-Ever Foreign Exchange Market Intervention
Video Conference Held with Overseas Investors
As anti-government protests in T?rkiye continue for a week, impacting the economy, the Turkish government has taken measures including the largest-ever intervention in the foreign exchange market.
On the 25th (local time), according to the Financial Times (FT) and Reuters, after Ekrem ?mamo?lu, the leading presidential candidate of T?rkiye's main opposition party, the Republican People's Party (CHP), and mayor of Istanbul, was detained on the 19th, investors sold off Turkish assets amid concerns over the erosion of the rule of law and large-scale protests.
Following ?mamo?lu's detention on the 19th, protests spread in major cities such as Istanbul and Ankara. So far, 1,418 people have been arrested in connection with the rallies and demonstrations.
As foreign capital fled T?rkiye en masse, stock prices plummeted and the Turkish currency, the lira, sharply depreciated. Last week, the Istanbul stock market fell 16.6%, marking the largest drop since the global financial crisis in October 2008, and the lira's value dropped by as much as 10% on the 19th.
The Central Bank of T?rkiye conducted the largest-ever foreign exchange market intervention to defend the lira, injecting $11.5 billion (approximately 16.8 trillion won) on the 19th alone. Financial authorities banned short selling on all stocks and relaxed regulations on share buybacks to prevent further stock price declines.
On the 25th, Mehmet ?im?ek, T?rkiye's Minister of Treasury and Finance, and Fatih Karahan, Governor of the Central Bank of T?rkiye, held a video conference with overseas investors, pledging to take all necessary measures to stabilize the market. After the meeting, the Turkish Treasury emphasized that Minister ?im?ek assured there would be no lasting damage to the economy and that additional measures would be taken if necessary.
According to the Turkish Treasury, about 4,500 overseas investors attended the meeting. Minister ?im?ek reportedly said that as part of the response, the Treasury could reduce government bond issuance and that issuing exchange rate-linked bonds could also be an option. Following the meeting, the Istanbul stock market rose about 4.5%, and the lira showed a slight appreciation against the US dollar, indicating relatively stable conditions.
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