Page 44 - TURKRptSept19

7.1 Is the Turkish lira any less vulnerable than last year?
In the first week of August, CitiGroup, Societe General and Deutsche Bank issued “Buy Lira” reports a few days before the recent depreciation in Turkish lira. Also on August 7, Bloomberg reported that “Local investors have stopped accumulating foreign currency”. Turks are familiar with such headlines by Erdogan media.
The Turkish lira plunged 12% against the yen early on August 26. It was the second time this year that Japanese investors were backed into to liquidating positions in one of their favourite emerging market trades. While the lira did start the day weaker, the move accelerated from about 07:20 in Tokyo (01:20 Istanbul time), around when Japanese margin-trading firms typically start closing loss-making client positions, Bloomberg reported, citing data from Gaitame.com Co. which showed 89% of lira-yen positions held by its clients were longs on August 25, compared with 11% of shorts. The latest sell-off came after a tit-for-tat exchange of tariffs by China and the US on August 23 spurred a rush for haven assets. Yield-hungry Japanese retail investors were in January also caught in another flash crash when the yen surged against every currency tracked by Bloomberg during the so-called witching hour of the Asian morning. “Margin accounts have recently accumulated lira longs,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo, was cited as saying by the news agency. “Given the lira’s nature as a high volatility currency, the surge in the yen must have
44 TURKEY Country Report September 2019 www.intellinews.com