Euro slips on Turkey angst, dollar holds firm

NEW YORK: The euro fell on Tuesday, hitting 13-month lows against the dollar and Swiss franc, as traders fret over the exposure of European banks to Turkey, whose currency rebounded from an all-time low.

The Turkish lira has lost more than 40 percent

of its value against the dollar this year, hit by worries over President Tayyip Erdogan's calls for lower interest rates and fraying ties with the United States..

On Tuesday, however, the lira recovered some ground, trading at 6.4350 to the dollar at 1451 GMT, up 6.7 percent on the day, after plunging to an all-time low of 7.24 on Monday.

Sanctions imposed by Washington on Ankara have stoked anxiety about Turkey's economy, which is already bogged down by double-digit inflation.

The currency was supported by Turkish finance minister Berat Albayrak's remarks at a news conference, where he said the lira will strengthen.

"I don't believe it's all over," said Minh Trang, senior currency trader at Silicon Valley Bank in Santa Clara, California. "We are just getting a bit of reprieve from the recent down move."

Concerns have lingered about European banks' loans to Turkey, stoking selling of regional stocks and the single currency, analysts said.

The euro was down nearly 0.3 percent at $1.13770 after touching a 13-month low at 1.13650 on Monday.

The common currency touched a 13-month low at 1.12700 Swiss franc before moving to $1.12875, down 0.3 percent on the day, according to EBS data.

The euro held above a 10-plus week low against the yen reached on Monday. It was last down 0.1 percent at 126.15 yen per euro.

The lira's bounce on Tuesday bolstered other emerging market currencies that were slammed by fears about Turkey's economic woes spreading.

The South African rand rose 1.4 percent, while the Indian rupee recovered from an all-time low.

Investors remain nervous about a renewed plunge in the lira, prompting capital outflows from other emerging markets that run hefty current account deficits and rely on foreign capital.

Until the crisis in Turkey is over, "risk aversion is likely to remain elevated, which will continue to benefit mainly the currency safe havens," said Antje Praefcke, a currency strategist at Commerzbank in Frankfurt.

Investors have raised their safe-haven holdings of the dollar as a result of the lira crisis.

An index that tracks the greenback versus a basket of other currencies was steady at 96.414, below a 13-month peak of 96.522 reached on Monday.