ISTANBUL: The Turkish lira gave up some of its earlier gains Wednesday after the central bank failed to reassure investors on its strategy to support the currency and military strikes on neighboring Syria moved a step closer.
The lira eased to 2.0606 against the dollar, from 2.0520 earlier and not far off last week’s record lows. It was also near record lows against the dollar/euro basket at 2.3873.
Financial markets have been concerned about possible U.S. intervention in Syria, thinking it could push oil prices higher in the short term, further increasing Turkey’s import bill and its gaping current account deficit.
The lira hit a record low of 2.07 against the dollar on Aug. 28, around 15 percent down from its peak this year, after central bank Governor Erdem Basci ruled out interest rate hikes.
The deficit makes Turkey particularly vulnerable to cuts in the U.S. Federal Reserve’s stimulus program because further falls in the lira would make it more expensive to finance.
The central bank suggested that more surprises lay ahead in its unorthodox efforts to manage the lira, like the use of gross reserves.