Turkey’s central bank has revealed it is ready to take “all necessary measures” to ensure financial stability after the collapse of the lira.
It has vowed to provide banks with “all the liquidity the banks need”.
The comments came after a widening diplomatic spat with the US prompted market turmoil in the country.
Investors weren’t reassured. Although the lira edged up a bit, it still hit a record low against the dollar, while stock markets in Asia and Europe fell.
The slide had worsened on Friday, when US President Donald Trump approved the doubling of tariffs on Turkish steel and aluminium, following Turkey’s refusal to free an American pastor who has been in detention in Turkey for nearly two years.
Turkish President Recep Tayyip Erdogan has vowed not to allow Turkey to be “brought to its knees” and has spoken of a plot against the country.
Before the new measures were announced, Japan’s Nikkei 225 had already fallen almost 2% in late trading. News of the announcement did nothing to perk up share values there and it closed down that amount.
Hong Kong’s Hang Seng index was down almost 1.6% in afternoon trade, but the Shanghai Composite recovered from a fall of 1.7% to trade with much smaller falls in afternoon trading.
In early trading in Europe, London’s 100-share index was down 0.5%, while the German and French share markets were down by similar amounts.
In Australia, the benchmark S&P/ASX 200 index lost 0.5%, while South Korea’s Kospi index was down 1.8%.
Investors globally are worried about the damage spreading and have been prompted to sell riskier assets, including Asian stocks and emerging market currencies.
Analysts said investors were now looking for safe havens in the form of the yen, as well as the US dollar.
Experts have blamed the drop in the Turkish lira on fears that the country is descending into an economic crisis.
Turkey’s stock market has also fallen 17%, while government borrowing costs have risen to 18% a year. Meanwhile, inflation has hit 15%.
Investors are worried that Turkish companies that borrowed heavily to profit from a construction boom may struggle to repay loans in dollars and euros since the weakened lira means there is now more to pay back.