Turkish Lira: Erdogan is now hunting speculators
According to Bloomberg, the central bank has asked commercial banks to inform it of any large dollar purchases that could have a negative impact on the market. Obviously, those who try to speculate on the Turkish Lira will risk finding themselves making an unpleasant visit to Turkish prisons, exactly as the economists who criticize the president risk.
Officials also asked banks to advise corporate clients looking to cover any potential lira losses through futures or forward foreign exchange purchases. Why the futures market? Because that is where Turkey has manipulated the lira most aggressively as it gets extra gain for its dollar (USD), something it cannot do in the spot market, where you have to have foreign money to act in the market, and the Turkish central bank no longer has any. sure, sooner or later the fx swaps will come to an end and then the current exchange rate, at 13 lire for one dollar, will seem like a joke.
Meanwhile, following its torrid surge in mid-December, when Erdogan unveiled a bizarre scheme involving linked foreign currency deposit accounts to "compensate" Turkish lira holders suffered heavy foreign exchange losses, with a 20% devaluation. . The Turkish currency was trading sharply lower again today, and was last seen at 13.62. At this rate it will return to an all-time low of 18 in no time.
The bottom line is that as long as Turkey fails to do the one thing that can restore some normalcy to the economy, a rate hike, the collapse of the currency will continue, especially now that Turkish real rates are at their highest. low they have ever been, prompting an overseas exodus of domestic and foreign investors from the country.
Too bad we will not have a rate hike, at least with this government, as Erdogan has repeatedly stated that he would rather see a total economic collapse rather than raise rates, and because he wants to devalue to "free" the strength of the economy through export. He also believes that high rates stimulate inflation rather than cool it. And if it doesn't work, the Turks and his successor will pay the bill….
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The article Turkish Lira: now Erdogan goes on the hunt for speculators comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lira-turca-ora-erdogan-va-a-caccia-di-speculatori/ on Thu, 06 Jan 2022 08:00:32 +0000.