The Turkish lira is still plunging, touching new record lows on Tuesday, at one point reaching 4.45 to the dollar.
A report from Moody’s, sounding the alarm bell, helped the currency’s fall by warning that “the potential triggers for a re-evaluation of Turkish country and banking risk by foreign investors continue to multiply,” as quoted by The Financial Times.
The increased risk is coming “with the continuing deterioration of Turkey’s geopolitical situation, its already strained domestic politics and the prospects of monetary policy tightening in more advanced economies,” the Moody’s report said.
“This overall picture suggests that the risk of an external shock, while still quite low, has increased. This means that the banking system is more susceptible to a loss of investor confidence. In such a scenario, banks would be forced to reduce lending to the economy, with a negative effect on asset risk, profitability and ultimately capital.”