Central Bank struggles to recover lira from historic lows

Turkey's Central Bank has taken a number of measures to defend the Turkish Lira, but did little to recover it off record lows, outweighed by a globally strong U.S. dollar and concerns about political actors' intervention in economic policy.

The Bank said it would adjust its reserve requirements, which are to control the amount of dollars in the market, to temporarily boost forex liquidity by some $1.5 billion over the coming weeks.

The lira weakened to 2.6455 against the dollar March 10 afternoon, just near the new record low set on March 6, as expectations of a U.S. interest rate hike pushed the dollar to multi-year highs.

The prospect of rising U.S. yields threatened to draw funds away from emerging markets, causing strains from Brazil to Turkey and South Africa. The Brazilian real led the rout, having fallen for the sixth straight session, according to Reuters data.

The lira has fallen around 12 percent against the dollar this year and was the worst-performing emerging market currency against the dollar March 10, according to Reuters data.

Turkey's domestic politics have also played a key role in the recent loss of the lira against the greenback, as well as severe fluctuations in global markets amid the rise in the value of the U.S. dollar.
The loss in the lira's value has been exacerbated by the demands of President Recep Tayyip Erdo?an and several ministers for sharp interest rate cuts to boost growth ahead of a June election.

"In this environment, countries don't need to give investors any excuse to sell," said Timothy Ash, head of emerging markets research at Standard Bank in London, as quoted by Reuters.

"In Turkey's case, we have an administration that thinks it is cleverer than everyone...