The Turkish lira plumbed new lows on Tuesday and the Russian rouble fell to a four-and-a-half year low against the euro as heavy fighting between Azeri and Armenian forces amplified geopolitical concerns in the region.
The lira tumbled to 7.85 against the dollar, slumping for a third straight session and erasing gains from late last week following a surprise interest rate hike by the central bank. Azerbaijan and Armenia sovereign dollar-denominated bonds slid for a second day in a row.
The lira, which has lost half its value since a full-blown currency crisis in 2018, has been hammered this year by worries around Turkey's depleted forex reserves and negative real interest rates, which, analysts said, the central bank's move last week would do little to abate.
"A deteriorating trend in FX reserves has been intact since years and was also a trigger for the start of the lira crisis in 2018," analysts at Commerzbank said.
"Last week's rate hike could have made a difference, but only if it could be reliably interpreted to be permanent and repeatable – but, it cannot."
Russia's rouble tumbled 1% to a six-month low versus the dollar.
Against the euro, the oil-linked currency sank to a four-and-a-half-year low of 93.3 with investors fearing the impact of renewed conflict between neighbors Armenia and Azerbaijan over the ethnic Armenian mountain enclave of Nagorno-Karabakh.
In an attempt to alleviate pressure on the rouble, the central bank said on Tuesday it would sell an additional 2.9 billion roubles a day starting from Oct. 1. It has been carrying out foreign currency interventions since March.
