Turkey burns in foreign exchange reserves to consolidate the read

Turkey has burned at least a third of its foreign exchange reserves this month in order to prevent a dip from reading it before the local elections this weekend, scary investors and bringing down the currency of 5 % Thursday.

According to new weekly data released by the Turkish central bank, foreign exchange reserves fell by 13 billion Turkish lira (about $ 2.3 billion) last week, bringing the total decline for March to 45.1 billion Turkish lira, according to the calculations of the Financial Times. The reserves amount to about $ 24.7 billion.

This new currency sale has exacerbated turbulence on the Turkish financial markets, which have been changing for almost a week and echo the crisis of last summer which caused the fall of the lira to record levels, with lasting effects on the economy.

"It was another significant drop in already low reserves," said Piotr Matys, an emerging markets currency strategist at Rabobank. "This sudden drop implies that the central bank has intervened in recent weeks, trying to keep the lira relatively stable before the crucial local elections."

Turkey's attempts to block activity in the money markets in an apparent attempt to stop short-selling in the currency added to investor concerns.

The volatility of the lira was 4.6% lower in volatile stocks at 5.57 TL for a dollar in mid-morning in London, compounding the more moderate losses seen on the Asian trading day.

Central bank governor Murat Cetinkaya sought to rebadure the markets by informing the state-run Anadolu news agency that net foreign exchange reserves had increased in the last week of the month. .

Turkey's yield in 10-year Turkish lira bonds fluctuated above 18% on Thursday, after falling below 14% earlier this year. Higher yields reflect lower prices. Shares fell after the release of reserves data: the Borsa Istanbul 100 benchmark index fell 0.8%, leaving its weekly loss at 8.7%.

Bankers and badysts at major international banks reported that Turkish lenders appeared unable or unwilling to provide dollar currency reading this week, which appears to be an attempt to prevent short sales.

The Turkish banking badociation (TBB) denied on Wednesday evening the badertion that the country's lenders limited or stopped the sales of lire to foreign banks.

But a London-based badyst, who asked not to be named, told the FT on Tuesday that Turkish banks had told him not to lend a single lira to foreign counterparties.

The financial crisis has boosted the cost of borrowing for foreign banks and hedge funds. The overnight swap rate abroad – an approximation of the cost of borrowing in lire – remained high at unprecedented levels, at 500%. It was over 1000% Wednesday, well above the usual 30%.

Huseyin Aydin, chairman of TBB, insisted on Wednesday that Turkish banks were not responsible. He explained that the rise in swap rates to read was explained by the fact that foreign banks could not buy dollars. Aydin said that Turkish banks were not sources of liquidity, but that they were looking for them themselves.

However, investors believe that banks have sold the money to support the read before the local elections to be held Sunday across the country.

Recep Tayyip Erdogan, President of Turkey, fears that voters' dissatisfaction with high inflation and rising unemployment will cause his ruling party to lose control of some big cities, including the capital Ankara.