Page 26 - BNE_magazine_06_2020 Growers

26 I Companies & Markets bne June 2020
bne:FX
The lira has belly-flopped and London, it is your fault
Akin Nazli in Belgrade
Turkey was not taking kindly to the sight of the Turkish lira weakening to an all-time low on May 7, beyond the rate seen during the country’s 2018 balance of payments crisis – government-run news service Anadolu Agency (AA) took the lead in bashing “manipulative” London-based finan- cial institutions, reporting that their attacks on the currency were continuing.
With the Turkish lira (TRY) falling in afternoon trading as far as 7.2685 to the USD – compared to the nadir of 7.2362 seen during the crisis – AA relayed to readers how the institutions were attempting to push the lira into further depreciation by swiftly buying large amounts of FX with the currency that they did not possess (short selling), adding that regulators had launched an investigation. It neither specified which regulators, nor named any banks or institutions facing the allegations.
The news service also stated that according to information compiled by an AA reporter from banking sources the financial institutions concerned defaulted after failing to meet their
lira liabilities to Turkish banks for FX they had bought, even though the Turkish central bank extended the closing time
of the electronic fund transfer (EFT) wire.
Sabah, Haberturk dish out more blame
AA also emphasised how the banks had snubbed free market rules and had pricked the attention of officials by launching their attacks targeting Turkish markets at the exact time that Treasury and Finance Minister Berat Albayrak was holding
a meeting with investors on the afternoon of May 6.
The Erdogan administration typically blames foreign market players when the lira gets into severe difficulties. It did so at the time of the currency crisis 21 months ago and when the currency hit turbulence during Turkey’s spring local elections last year, which produced the controversial Istanbul “revote”.
London-based investment banks defaulted in USD/TRY trans- actions prior to those local polls, with TRY interest rates in London jumping to over 1,000%, AA recalled.
AA’s article was published in its Turkish edition. There was no lira story carried by its English edition as of 13:00 Istanbul time.
“They” are creating perceptions and spreading fear on the lira market, daily Sabah – a publication seen as fiercely loyal
www.bne.eu
to President Recep Tayyip Erdogan – reported in its May 7 Turkish edition. There was no lira story in its English edition as of 13:30 Istanbul time.
According to Sabah, “they” have been trying to muddy the picture by flaring up a discussion commenced over the central bank’s FX reserves.
No reserve "unusable"
No central bank reserve is designated as “unusable”, Sabah underlined, adding that the national lender’s gross reserves stood at $88bn, while the banks’ gross reserves amounted to $35bn, bringing total reserves to $123bn.
Also blaming market actors in London for the latest assault on the lira was Haberturk.
“With thinking USD depreciation is due to Forex markets, we’ve forbidden Forex... No need for a commentary,” Gokhan Uskuay of Tacirler Invest wrote in a tweet when asked about “AA’s London story”.
“My humble advice to the central bank and officials. Liquid- ity procurement via dollar contracts at VIOP [Borsa Istanbul Derivatives Market] could be revived. At the moment, biggest buyers are local institutions that have FX debt or for imports,” he added in another tweet.
Braced for organised assaults on the lira, Turkey’s institutions sat tall in their saddles.
Banking watchdog BDDK said that it had banned BNP Paribas, Citibank and UBS from performing lira transactions since they had fallen short of meeting their lira liabilities to Turkish banks at maturity.
Involvement in trading on rates, FX and credit default swaps (CDS) “that increases disorder in markets by taking advan- tage of shallow markets or price fluctuations during offer and demand abnormalities” is considered misleading and manipu- lative, according to BDDK’s “Manipulative and Misleading Trading on Financial Markets” regulation published early on May 7 in Turkey’s Official Gazette.
Swaps, forwards, options or other derivative trading with foreigners or providing lira abroad in a way that undermines the banking regulator’s restrictions would be deemed manipu-