ISTANBUL--Turkey's central bank Monday tweaked its reserve requirements in a move seen by investors as a backdoor tightening aimed at helping the country's ailing currency.

In a statement, the central bank said it has increased reserve-requirement ratios for foreign currency deposits/participation funds by 200 basis points for all maturity brackets, in order to support financial stability.

With this move, $4.2 billion of forex liquidity will be withdrawn from the market, the central bank said.

Policymakers have been reluctant to raise interest rates, with the rerun of the Istanbul election looming and the economy mired in recession.

After the central bank's announcement, the Turkish lira was trading 0.5% higher against the dollar.

The Turkish currency lost 30% of its value against the dollar in 2018, and has lost a further 13% since the start of this year.

The lira came under renewed pressure after the national election board earlier this month canceled results of the Istanbul mayoral race, which the ruling party of President Recep Tayyip Erdogan lost, fueling investors' concerns of political instability and economic volatility.

Tension has also been mounting with the U.S. over Ankara's push to purchase Russian S-400 missile defense systems, a move that could lead to sanctions from Washington.

(END) Dow Jones Newswires

May 27, 2019 04:37 ET (08:37 GMT)

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