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Sunday, August 25, 2019

Turkish lira rebounds on central bank intervention

The Turkish lira rebounded modestly on Monday after the country's central bank stepped in to prop up the currency and political tensions eased.

The lira tumbled to record lows against the dollar last week amid the mounting political crisis stemming from a bribery investigation that has engulfed several government officials, The Wall Street Journal reports.

Prime Minister Recep Tayyip Erdogan blasted the judiciary and fired nearly half of his cabinet, with one departing minister calling for Erdogan to step down, which further upset markets.

After dropping approximately 6 percent from the time the bribery investigation was revealed Dec. 17, the lira rose 1.3 percent against the dollar, which traded at TRY2.1274, according to The Wall Street Journal.

"Stepped-up intervention and some reports of easing tension between the government and judiciary has seen the Turkish lira bounce back," Brown Brothers Harriman analysts wrote in a note to clients Monday, The Wall Street Journal reports.

The lira was already considered one of the most fragile emerging-market currencies, with Turkey facing a wide current-account deficit.

Some analysts say the Turkish central bank would also likely take more aggressive steps, including an interest-rate hike, to protect the currency if it saw more large losses.