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against the dollar.
Later in the month, the central bank governor confirmed that “state banks were active in the FX market” and he also talked about the currency levels, saying that lira was competitive at current levels.
State banks have tapped around $30bn in 2019 and $7bn in January 2020 of central bank reserves in buying up lira, ​a Reuters analysis of the central bank’s balance sheet showed in February​. The state banks then re-deposit lira at the central bank, officials and bankers with knowledge of this loop told the news agency, with one official at a state lender saying Turkey’s banks are now staffed by traders at all hours, part of what some call a “national team” ready to respond to any lira weakness.
“The script now in Turkey is for managed markets, with foreigners pushed out, [and] this strategy is working to an extent,” said Timothy Ash, strategist at BlueBay Asset Management.
Turkey is repeating the mistakes that led to the 2018 lira crisis and another freefall for the currency may not be far off, ​according to an academic at international affairs think tank Chatham House​.
The banking watchdog BDDK said on February 9 it is reducing the limit for Turkish banks’ forex swap, spot and forward transactions with foreign entities to 10% of a bank’s equity from the 25% limit it set in August 2018.
The rate will be calculated daily and new transactions will not be performed or renewed until they have fallen to the new limit, it added.
The Turkish lira slipped to more than six to the dollar on February 7.
The Turkish financial markets are subject to undeclared interventions. The equity market is under an unofficial suspension with the short-selling ban introduced on the most liquid banking stocks. The squeeze on lira liquidity in London is introduced whenever required.
30​ TURKEY Country Report​ March 2020 ​ ​www.intellinews.com