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17 October 2019
REGULATION

Turkey advises banks against offering lira liquidity offshore

Turkish regulators last orchestrated a liquidity squeeze in the offshore market in March 2019, limiting a key source of lira liquidity for foreign investors trading the nation’s assets.

TURKISH LIRA/BLOOMBERG


Turkish regulators have advised some local lenders against offering lira liquidity in the offshore money-market, in an apparent attempt to stand in the way of short-selling of the currency, reported Bloomberg.

The advice is said to have been issued by the Turkish banking watchdog, Banking Regulation and Supervision Agency, but was not an official directive and comes amid what is being described as heavy dollar sales by state banks over the last week to stem a slide in the lira.

Earlier, Turkey’s stock exchange ‘temporarily prohibited’ short selling in seven banks, including Turkiye Halk Bankasi, against which the US brought a criminal case for fraud and money laundering.

The Turkish lira extended a decline this month to more than four per cent as traders brace for punitive US sanctions in retaliation to Ankara’s military offensive in Syria.

The move drove overnight swap rates to over 1,000 per cent, burning short-sellers and forcing investors to dump Turkish assets as they scrambled to get their hands-on funding.

Signs of a new liquidity shortage in the offshore market first appeared earlier this week, when the one-month forward implied rate on the Turkish lira jumped more than 400 basis points to over 20 per cent.


RELATED STORIES: BANKING REGULATION AND SUPERVISION AGENCY LIRA US SANCTIONS


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