For the first time since the March 31 municipal elections, the Turkish lira enjoyed a nearly 1 percent daily gain against the U.S. dollar while Turkey's stock exchange Borsa Istanbul (BIST) soared over 4 percent at market closing.
Following the comments of U.S.-based credit rating agency Standard & Poor's (S&P) during a briefing on the Turkish markets, the Turkish lira quickly recovered daily losses and was trading at 5.57 per dollar at closing. The lira was performing on wide-band volatility after Sunday's elections and hit as low as 5.66 during yesterday's trading session.
Turkey's credit rating is not currently at risk of a downgrade though a further fall in lira would be "very, very bad news" for the country's companies and banks, S&P Global said yesterday. The agency's EMEA director also noted that the Turkish private sector is capable of paying loans unless the circumstances change.
Borsa Istanbul also surged by 4.13 percent and closed the day at 98,337 points.
The news that the European Bank for Reconstruction and Development (EBRD) is interested in buying out the non-performing loans in the Turkish market also enabled the surge in Turkish assets.
EBRD Turkey Director Arvid Tuerkner told Bloomberg yesterday that the bank is following the bad loans in Turkey and they are ready to kick in if the market conditions allow.
International Finance Corporation (IFC), a division of the World Bank Group, Turkey Director Arnaut Dupoizat also expressed the corporation's support for the reconstruction of the bad loans in the Turkish market.
Analysts reported that EBRD and IFC are interested in the Turkish non-performing loans. Following the currency volatility last year, private companies experienced difficulty in paying back their foreign exchange loans, leading to an increase in bad loans. According to updated sector data from Turkey's banking watchdog, the Banking Regulation and Supervision Agency (BDDK), the ratio of non-performing loans could rise to 6 percent.
Meanwhile, the gross reserves of the Central Bank of the Republic of Turkey (CBRT) also rose by $3.85 billion and reached $96.2 billion last week, according to the data released by the bank yesterday.
