ISTANBUL: The Turkish lira drifted towards its record low on Thursday after Finance Minister Berat Albayrak downplayed the currency's volatility and emphasized its competitiveness, and as the central bank continued to raise backdoor borrowing costs. Turks have flocked to hard currencies in recent weeks and analysts have called for more decisive measures such as a formal tightening of monetary policy to stabilize markets and head off deeper economic problems.
The lira weakened slightly to 7.3400 by 0930 GMT. It hit a record low of 7.3650 on Friday, sliding 19% against the US currency this year to make it one of the worst performers in emerging markets (EMs). Turkish locals' holdings of foreign currencies and gold jumped by more than $6 billion in a week to a record high of $219.51 billion as of August 7, accelerating a trend of dollarization as the lira tumbled, central bank data showed on Thursday.
The forex deposits and funds, including precious metals, held by locals was $212.92 billion a week earlier. The lira touched record lows against the dollar last week. The official data also showed the central bank's gross forex reserves edged down to $46.59 billion last week, from $46.67 billion a week earlier.
In response to the volatility, the central bank has halted cheap credit lines and on Thursday it funded the market at a simple rate of 10.96% via a 20 billion lira repo that used traditional bids, in a further sign of tightening.
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