West fears strong Turkey - Erdogan

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"It's an attempt at manipulation while Turkey is in an electoral period", he said, three days ahead of nationwide local elections on Sunday.

Turkey's central bank on Thursday sought to reassure investors over its foreign currency reserves after the sharpest drop in the local lira since a spat with the United States triggered a currency crisis a year ago.

Berich explained that the move by the Turkish authorities has supported the currency in the short-term by completely drying up the lira's liquidity and tightening monetary policy without a formal interest rate hike, but that it has dented investor confidence in the Turkish economy in the longer term.

Speaking to young voters in Ankara ahead of local elections on Sunday, Erdogan said Turkey had thwarted the attacks by the United States and the West on the lira and added that some banks were playing a game on the currency ahead of the vote.

In a statement to Reuters, Hüseyin Aydın said the reason behind the rise in lira swap rates was that there were not enough liras for foreign banks to buy dollars, and added that Turkey had shown the necessary stance against a speculative attack on the lira.

The Turkish currency against US dollar stood around 5.53 by 9 p.m. local time (1800 GMT) on Thursday, while the exchange rate saw over 5.70 during the past few days. He did not name the banks. The tables have turned. "As interest rates are brought down, inflation will fall", Erdogan said.

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The lira had weakened to 5.8490 on Friday before settling at 5.7625, its lowest closing value since October. Last year, it plunged nearly 30 per cent against the dollar.

The head of state noted that the problems faced by Turkey are artificial and are created by a number of countries interested in weakening Turkey.

Non-performing loans pose no systemic risk to Turkey's banking sector, Finance Minister Berat Albayrak said on Thursday. As of 1510 GMT, it had clawed back some of its losses to 5.57.

"We have an agreement with Russian Federation and we are bound by it", he said, adding pressure from other countries was against worldwide law.

Turkish financial regulators opened investigations into JP Morgan and other banks last weekend, accusing them of providing misinformation in reports that stoked volatility in the lira.