ISTANBUL, Dec 30 (Reuters) - The Turkish lira traded flat against the dollar on Monday after Turkey’s central bank changed foreign currency reserve requirements, in a move withdrawing some $3 billion FX liquidity from the market.
The central bank increased reserve requirement ratios for foreign exchange deposits and participation funds by 200 basis points, but said banks complying with loan growth conditions set by the bank will not be affected by the amendment.
The bank linked the reserve requirement to growth in loans in August, encouraging banks to lend more to support economic activity.
Earlier this month, the central bank said it will use required reserves “in an effective and flexible way” in 2020 as a fine tuning tool in addition to its main policy instrument.
The lira traded at 5.9470 against the dollar at 0830 GMT, little changed from Friday’s close of 5.95. The currency has declined nearly 9% this year mainly over concerns about deteriorating ties between Ankara and Washington.
Ankara and Washington have been at odds over a host of issues including difference of policy in Syria. Turkey has also faced potential U.S. sanctions over its purchase of the Russian S-400 missile defence system.
Turkey’s Istanbul stock exchange blue-chip BIST100 index was up 0.8% while the banking index was up 1.22%. (Reporting by Behiye Selin Taner Writing by Ezgi Erkoyun Editing by Daren Butler)