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dictator” once more started making his vague allegations that somewhere out there are fiendish unidentified people working on a plot to bring Turkey to its knees and conquer it.
It has long been obvious that, try as it might, the Erdogan administration cannot for ever keep the lira in a fixed range tolerable to the palace. Turkey’s international reserves are melting away as the defence of the currency goes on in vain and the prospect of Ankara attracting some big deal hard currency appears remote.
“When will the Turkish lira spin out of control in a rout?” is the trillion-lira question that traders ask every day now. Well, as alarming as the fresh weakness in the currency was, the answer was “not yet”. Ankara responded by showing an ability to still keep some kind of grip on the lira, ​managing to hold the USD/TRY in the 6.97s​.
Note, however, that ​an old tradition is back: offers of free market FX rates at Istanbul’s Grand Bazaar​ are once more in the picture and the available rate stood above 7.00 on July 28.
“State bank fx traders must have been asleep or in Bodrum [a popular vacation destination on Turkey’s southern Aegean coast], or both,” Timothy Ash of Bluebay Asset Management tweeted on July 28, commenting on the lira’s flash crash the previous day.
“Seems like a big battle ongoing again this morning as state owned banks try and support the lira. At this stage it is pretty clear the lira is no longer free floating but heavily managed,” Ash added in another tweet, before later adding on Twitter: “Not sure there was anything specific over the past 24h, it just seems it’s an accumulation of concerns over bad CBRT [Central Bank of the Republic of Turkey] policy and massive intervention whittling away at the net reserve position—the CBRT spending other people’s money.”
The Financial Times reported on July 28 that Turkish authorities have burnt through $2bn​ defending the lira in the latest volatility wave.
There have been articles indicating that the lira’s latest woes, particularly its struggle against recording a record low against the euro, may have been mostly driven by fears that Brussels may impose sanctions on Ankara over illicit drilling for hydrocarbons in the eastern Mediterranean but the EUR/TRY rate stress appears to be simply down to the euro rising against the dollar.
The trolls of Erdogan’s ruling Justice and Development Party (AKP), meanwhile, are turning their ire on foreign analysts, including Ash. That an AKP troll should pick a fight with Ash is a touch ironic given that he generally supported the party’s attempts at steering the economy during the time when
45​ TURKEY Country Report​ August 2020 ​ ​www.intellinews.com