They seek it here, they seek it there, those Erdogan officials seek FX everywhere.
In November 2018, Turkish President Recep Tayyip Erdogan was reportedly unconvinced—following the brutal murder of dissident Saudi journalist Jamal Khashoggi in Saudi Arabia’s Istanbul Consulate—that Crown Prince Mohammed bin Salman (MbS), should remain in power as the de facto leader of Saudi Arabia. And the Saudis were fuming at Erdogan for authorising the release of evidence from Turkish intelligence that left MbS exposed to global revulsion.
But that was then. This is now. The Turkish economy is going to hell in a bucket. Needs must.
Hence, His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince and Deputy Prime Minister, received Spokesperson of the Turkish Presidency Dr Ibrahim Kalin and Turkish Minister of Treasury and Finance Nureddin Nebati, Saudi Press Agency (SPA) reported on September 26.
Article photo: Turkey’s foreign ministry (@TC_Disisleri) on September 23 celebrated the national day of “brother” Saudi Arabia.
Kalin conveyed the greetings of Erdogan to the custodian of the two holy mosques, King Salman bin Abdulaziz Al Saud (MbS’ father), and to MbS.
In turn, MbS sent greetings of the custodian of the two holy mosques and his greetings to Erdogan.
During the audience, aspects of bilateral relations and ways of developing such relations in various fields were reviewed (kerching!), while there was also discussion of cooperation on a number of issues of common interest (it wouldn’t be seemly otherwise).
From the Saudi side Dr Musaed bin Mohammed Al-Aiban (national security), Mohammed Al Al-Sheikh (minister of state) and finance minister Mohammed Al-Jdaan also attended in the meeting.
Ahead of the meeting, the Erdogan-loyalist Daily Sabah noted that Ankara and Riyadh have in recent months attempted to repair diplomatic damage caused during a decade of tension, especially in the aftermath of the murder of Khashoggi.
The leaders declared their determination to reactivate economic potential and launch a new era of cooperation in bilateral ties, including in the political, economic, military and security spheres (good to hear!).
Since September 21, when the Fed hiked its policy rate by 75 bp and updated its projections, the chorus that sings “The lira’s at an all-time low” has again been on stage. The USD/TRY has indeed once more been breaking records.
Lira costs in the London offshore swap market have, meanwhile, since last week, been booming again, a sign that Turkish banks are cutting the lira supply in the market to prevent foreigners from shorting lira.
On September 25, the USD/TRY broke through the 18.40-level. It is currently tumbling through to 18.50.
Since the beginning of this year, the Turkish government has pumped in stacks of lira via loans. There are perfectly suitable global conditions for another major-scale lira crash.
It is not possible to estimate the exact timing of the crash ahead. The government will burn through whatever it can in the FX market before letting the currency plunge into the abyss.
Some new instrument such as a CPI-indexed bond for individuals, which would be announced with the burning of some more huge amounts of FX and a media campaign suggesting that Erdogan is wrestling the dollar to the ground, can be expected.
In August, there were some $15bn-20bn of FX inflows into the country, said to have come from Russia. In September, nothing much has been observed.
Meanwhile, the government’s hunt for FX among the “friendly countries,” said to include Russia, the UAE, Saudi Arabia and Qatar, continues.
Erdogan spent the whole of last week in the US where he headed to attend the UN General Assembly annual summit in New York. At one point, he was filmed in Central Park, cool as a moose, meeting passersby (some of whom looked as if they were straight out of central casting), as if he hadn’t a care in the world. You never know your luck. On September 19, he met with the Conference of Presidents of Major American Jewish Organizations.
So far, there are no reports of the US excursion having landed some hard capital.
Erdogan will run for re-election at some point in the next nine months.