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    Turkey central bank vows to ensure stability after lira slide

    ANKARA (AFP) – Turkey’s central bank yesterday vowed to use all the tools at its disposal to “maintain price stability” after a slide in the lira last week amid investor concerns over domestic monetary policy.

    The lira lost around 5.2 per cent in value against the greenback last Friday, its worst day since a currency crisis last year triggered by a United States (US) diplomatic spat and sanctions.

    The bank said it “will use all monetary policy and liquidity management instruments to maintain price stability and support financial stability, if deemed necessary”.

    After the bank’s statement on Monday, the lira pared back some of its losses to reach 5.64 against the dollar at 0915GMT, up two per cent on the day.

    The bank suspended one-week repo auctions last Friday for an undefined period after markets reacted to an unexpected drop in the bank’s foreign currency reserves.

    Analysts described the move as monetary policy “tightening by the back door”.

    In a bid to ease investor concerns, central bank governor Murat Cetinkaya yesterday said the bank’s fundamental policy was to “sustain and strengthen reserves”, state news agency Anadolu reported.

    Cetinkaya told the agency in an interview that fluctuations in reserves were “not unusual” amid speculation the fall could be a result of the bank propping up the lira.

    The Banking Regulation and Supervision Agency (BDDK) and the Capital Markets Board (SPK) last Saturday said they launched probes into JP Morgan over a report by the investment bank’s analysts which apparently recommended shorting the lira last Friday.

    The BDDK issued two statements last Saturday which said there had been complaints over “misleading and manipulative” guidance from JP Morgan and other unnamed banks. President Recep Tayyip Erdogan last Sunday said that Turkey would “crack down strongly on the banks who conduct such manipulations” before local elections on March 31. JP Morgan representatives in Turkey did not immediately reply to a request seeking comment.

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