The Turkish government moved swiftly to calm investors before financial markets reopen Monday after a failed coup, with the central bank promising unlimited liquidity to lenders and the deputy prime minister posting on Twitter that there’s “no need to worry.”
Turkey’s lira plunged the most against the dollar in eight years on Friday as tanks rolled through the streets of Ankara and Istanbul, and warplanes and helicopters circled overhead. While President Recep Tayyip Erdogan’s forces rounded up thousands of judges and military officers involved in the coup attempt, officials sought to prevent a sell-off when stocks and bonds traders have their first chance to react to the news on Monday.
“We’re on duty,” Simsek said on Twitter, adding that he’d spoken to central bank Governor Murat Cetinkaya and will hold a teleconference with international investors on Sunday. “Turkey is normalizing rapidly after the coup attempt was repelled by the nation. Our country’s macroeconomic foundations are solid.”
In addition to guaranteeing liquidity, the central bank said it would support the lira by removing the limits on foreign currency deposits that commercial lenders are allowed to use as collateral.
Though quashed within hours, the failed takeover threatens to destabilize an economy that depends heavily on capital inflows to finance its current-account deficit. Erdogan’s increasingly authoritarian streak was already worrying investors as he pushed his top economic advisers one-by-one from office, stoking fears of policy mistakes and leading to a drop in foreign investment.

Falling Investment

Of the $15.8 billion foreigners poured into Turkey in the first five months this year, net direct investments accounted for only $2.3 billion -- down 50 percent from the same period a year ago -- with the remainder coming from inflows of hot money into stocks and bonds, as well as other investments including loans to banks and companies.
That “will now surely reverse, causing inevitable market distress,” Michael Howell, managing director of CrossBorder Capital, said in an e-mail.
Turkey had geopolitical risks for investors to consider before Friday, including Erdogan’s intensifying military campaign against autonomy-seeking Kurds in the country’s southeast. The president has also committed the army to an active and perilous role in Syria’s war, with an estimated 3 million refugees crossing over the border into Turkey.