Panic gripped international banks on Tuesday when the Turkish lira’s daily exchange rate (swap) for foreign trade jumped to 1,050%, protothema.gr reports.
International financial institutions have tried to get rid of the Turkish currency, as the cost of borrowing in the Turkish lira has skyrocketed. However, many of them failed to close positions in the Turkish currency, as a result of the policy pursued by the Erdogan government and which undermines the liquidity of the pound in international markets, according to sources who spoke to Bloomberg.
International banks were unable to trade due to restrictions imposed by the Turkish government, forcing them to keep the currency at the overnight rate at 1.050%, the highest level since March.
Nevertheless, yesterday’s move did not go unpunished, as the banks took their revenge today, proceeding with massive sell-offs of the lira, with the Turkish currency recording losses of more than 2.2% against the dollar and the exchange rate exceeding the psychological limit of 7, formed at 7,084 pounds per dollar.
Restrictions by the Turkish government are a tactic they have followed in the past, creating a technical liquidity crisis in the lira, in order to prevent an erratic devaluation of the currency.
The technical crisis has left foreign banks unable to trade as it did yesterday, with authorities temporarily barring Turkish banks from trading with Citigroup, UBS and BNP Paribas.
Read the full report at thenationalherald.com
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