Posted by meb at October 23rd, 2008

The Turkish lira fell to a 28-month low, while bond yields rose to a four-year high on Thursday, as worries over the economic outlook and growing global risk aversion undermined market confidence.

The lira eased more than 6 percent in afternoon trade to above1.73 levels against the dollar from its Wednesday interbank bank close of 1.63.

The currency has lost around a quarter of its value against the U.S. dollar this month as investors and hedge funds have been selling their assets and demanding U.S. dollar while leaving the emerging market.

The yield on the benchmark June 23, 2010, rose almost 3 percent jumped above 24.00 percent to hit its highest level in four years.

Turkish stocks which lost 2.64 percent at the close of the morning session, also extended their losses and fell nearly 5 percent in afternoon trade. It has lost more than half of its value this year amid the mounting global risk aversion.

Markets were eyeing the possibility of additional steps from the government and central bank to stabilize markets and prop up investor sentiment.

“Every kind of measure that the government announces in connection with the economy will have a positive impact (on the markets),” Reuters reported citing a forex trader.

Finance Minister Kemal Unakitan said Turkey would introduce ceilings on the budget deficit and the public debt stock to protect the country from the financial crisis.

He said the government will keep a 10 percent withholding tax on local bond investors’ earnings but remove it for equities to help the country weather the financial crisis.

Foreign investors are exempt from withholding tax on bonds, bills and equities.

Central Bank Governor Durmus Yilmaz said the bank will double borrowing limits in the forex depo market to $10.8 billion starting from Friday and said that there was no problem with foreign exchange liquidity.

Global stocks also fell on fears of a recession. Asian stocks fell to a 4-year low on Thursday on growing fears that emerging market weakness would prolong a global recession and depress corporate earnings, pushing the yen to a 6-year high against the euro.

U.S. stock futures pointed to another bad day on Wall Street after shares dropped to a five-year low on Wednesday, hit by weak corporate earnings.
source: Hurriyet daily

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