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7.0​ ​FX
The Turkish state banks sold on July 3 at least $500mn at 6.8550, two of the unnamed sources told Bloomberg.
“It is not too difficult to estimate the end of the adventurous economy that Ankara has been engaged in with the fear of losing power, but it is not possible not to wonder what its dimensions of damage will be,” Ugur Gurses, a former central banker, ​wrote​ on July 4 in an op-ed entitled “Adventurous economic policy experiment in Turkey”.
“If we take into consideration that the open position of the Central Bank including its reserves and its gold reserves [net international reserves minus open swap stock] has roughly reached 35 billion dollars, then those who are administrating economy policy in Ankara have created, through public banks and the Central Bank, an open position of 45 billion dollars,” Ugur Gurses, a former central banker, ​wrote​ on July 19 in an op-ed entitled “Economic wreckage due to ‘votes erosion syndrome’ of the AKP” for Duvar English.
Turkey is asking banks to use futures contracts to hedge their growing foreign-currency liabilities​ to help ease some of the pressure that a surge in dollar demand from local businesses is putting on the Turkish lira (TRY) exchange rate, some unnamed people with knowledge of the matter, who asked not to be identified because the matter is not public, ​told​ Bloomberg on July 23.
Authorities advised lenders last week that instead of buying hard currency in the spot market, they should purchase futures agreements to balance any foreign-currency obligations toward their clients, according to sources.
The call comes as state-owned banks approach the legal limit on how much currency risk they can hold, a result of their efforts to support the TRY by selling dollars on the spot market, Bloomberg recalled.
Still, given the lack of liquidity in the futures market, any meaningful shift—at least initially—would probably see the central bank take on a large role as a counterparty, Bloomberg noted.
On July 20, the central bank returned to shorting dollar futures on Borsa Istanbul derivatives market (VIOP).
The authority shorted a total of $6bn of contracts within 2019.
It shorted $38mn worth of contracts on July 20, $3.3mn on July 21, $11.5mn on July 22 and $71.8mn on July 23, @e507 observed.
43​ TURKEY Country Report​ August 2020 ​ ​www.intellinews.com