Western Balkans citizens legally resident in EU equal to 14% of region’s population
International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
Consumer confidence index drops q/q, y/y in 4Q20
M&A in Central and Eastern Europe fell 16% in value in 2020, says CMS report
Russia’s grain harvest may fall to 131mn tonnes in 2021 from 133mn tonnes in 2020
ING: Russia balance of payments: supportive of ruble in the near-term, but risks for 2H21 mount.
Western Balkans and Ukraine urged to scrutinise coal subsidies
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
Private finance mobilised by development banks up 9% to $175bn in 2019
VISEGRAD BLOG: Central Europe's populists need a new strategy for Biden
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
Hungarian vehicle makers hit by supply chain shortage
COVID-19 and Trump’s indifference helped human rights abusers in 2020
OUTLOOK 2021 Poland
OUTLOOK 2021 Slovakia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
FDI inflows to CEE down 58% in 1H20 but rebound expected
BALKAN BLOG: US approach to switch from quick-fix dealmaking to experience and cooperation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
BALKAN BLOG: The controversial recipe for building up Albania
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING: Growth in the Balkans: from zero to hero again?
Spring lockdown caused spike in online transactions in Croatia
Labour demand down 28% y/y in Croatia in 2020
EBRD investments reach record €11bn in pandemic-struck 2020
OUTLOOK 2021 Moldova
Storming parliaments: New Europe's greatest hits
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Montenegrins say state administration is most corrupt institution
North Macedonia plans to cut personal income tax in IT sector to zero in 2023
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
OUTLOOK 2021 Slovenia
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Turkey’s benchmark rate held as concerns over faltering recovery come to fore
Turkish lira breaches HSBC’s stop-loss, Turkey ETF signalling outflows
ISTANBUL BLOG: Biden must find a way to work with Trump’s strongman pal Erdogan
CAUCASUS BLOG : What can Biden offer the Caucasus and Stans, all but forgotten about by Trump?
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
OUTLOOK 2021 Georgia
Iran’s technology minister indicted for failing to properly implement internet censorship
No US move to rejoin Iran nuclear deal imminent say Biden national security nominees
TEHRAN BLOG: Will Biden bet on a quick return to the Iran nuclear deal?
Tehran Stock Exchange chief quits amid “Black Monday” fury
Central Asia vaccination plans underwhelm, but governments look unruffled
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
Download the pdf version
More...
Turkey was not taking kindly to the sight of the Turkish lira weakening to an all-time low on May 7, beyond the rate seen during the country’s 2018 balance of payments crisis—government-run news service Anadolu Agency (AA) took the lead in bashing “manipulative” London-based financial institutions, reporting that their attacks on the currency were continuing.
With the Turkish lira (TRY) falling in afternoon trading as far as 7.2685 to the USD—compared to the nadir of 7.2362 seen during the crisis—AA relayed to readers how the institutions were attempting to push the lira into further depreciation by swiftly buying large amounts of FX with the currency that they did not possess (short selling), adding that regulators had launched an investigation. It neither specified which regulators, nor named any banks or institutions facing the allegations.
The news service also stated that according to information compiled by an AA reporter from banking sources the financial institutions concerned defaulted after failing to meet their lira liabilities to Turkish banks for FX they had bought, even though the Turkish central bank extended the closing time of the electronic fund transfer (EFT) wire.
Sabah, Haberturk dish out more blame
AA also emphasised how the banks had snubbed free market rules and had pricked the attention of officials by launching their attacks targeting Turkish markets at the exact time that Treasury and Finance Minister Berat Albayrak was holding a meeting with investors on the afternoon of May 6.
The Erdogan administration typically blames foreign market players when the lira gets into severe difficulties. It did so at the time of the currency crisis 21 months ago and when the currency hit turbulence during Turkey’s spring local elections last year, which produced the controversial Istanbul “revote”.
London-based investment banks defaulted in USD/TRY transactions prior to those local polls, with TRY interest rates in London jumping to over 1,000%, AA recalled.
AA’s article was published in its Turkish edition. There was no lira story carried by its English edition as of 13:00 Istanbul time.
“They” are creating perceptions and spreading fear on the lira market, daily Sabah—a publication seen as fiercely loyal to President Recep Tayyip Erdogan—reported in its May 7 Turkish edition. There was no lira story in its English edition as of 13:30 Istanbul time.
According to Sabah, “they” have been trying to muddy the picture by flaring up a discussion commenced over the central bank’s FX reserves.
No reserve "unusable"
No central bank reserve is designated as “unusable”, Sabah underlined, adding that the national lender’s gross reserves stood at $88bn, while the banks’ gross reserves amounted to $35bn, bringing total reserves to $123bn.
Also blaming market actors in London for the latest assault on the lira was Haberturk.
“With thinking USD depreciation is due to Forex markets, we’ve forbidden Forex… No need for a commentary,” Gokhan Uskuay of Tacirler Invest wrote in a tweet when asked about “AA’s London story”.
“My humble advice to the central bank and officials. Liquidity procurement via dollar contracts at VIOP [Borsa Istanbul Derivatives Market] could be revived. At the moment, biggest buyers are local institutions that have FX debt or for imports,” he added in another tweet.
Braced for organised assaults on the lira, Turkey’s institutions sat tall in their saddles.
Banking watchdog BDDK said that it had banned BNP Paribas, Citibank and UBS from performing lira transactions since they had fallen short of meeting their lira liabilities to Turkish banks at maturity.
Involvement in trading on rates, FX and credit default swaps (CDS) “that increases disorder in markets by taking advantage of shallow markets or price fluctuations during offer and demand abnormalities” is considered misleading and manipulative, according to BDDK’s “Manipulative and Misleading Trading on Financial Markets” regulation published early on May 7 in Turkey’s Official Gazette.
Swaps, forwards, options or other derivative trading with foreigners or providing lira abroad in a way that undermines the banking regulator’s restrictions would be deemed manipulative trading, while the spreading of “misleading or wrong information” as regards financial assets by any mass media tool would be considered manipulative, the new regulation also stated.
“Lots of people have focused on the Albayrak call [with investors on May 6] as the driver for the TRY weakness yesterday. I don’t think that is the case, as the TRY had already started weakening earlier this week… On the Albayrak call, I thought he did a decent job, and the Treasury prepared presentation was good—lots of data/info and Albayrak highlighted key strengths which are often overlooked,” Timothy Ash of Bluebay Asset Management said after the BDDK regulation was issued in a note to investors.
“I guess there was not that much new, and there was no new info on progress on securing FX SWAPs from friendly central banks, and he gave a straight bat on the IMF front. I have to say that compared to lots of presentations from MOFs [finance ministries] in EM I have seen in recent weeks on COVID19, this was one of the better ones. But the problem for the TRY is more fundamental at this stage… the market does not trust monetary policy in Turkey,” Ash added.
Another slash in the wind
Wags on the market commend Albayrak for delivering the best PowerPoint slide shows across the EM universe—but, more seriously, they’re quick to add that the Turkish central bank has little or no credibility left, thus the finance minister really should come up with some more meaningful content if he’s not to find himself taking yet another slash in the wind. Who murdered that credibility? Perhaps “some London-based financial institutions”?
Academic and market commentator Evren Bolgun was one of many observers dumb-founded by the new BDDK regulation, writing on Twitter that no other country has such an open-ended and unjust regulation.
“We can say martial law has been declared on FX markets. Everything’s considered to be manipulation, i.e. saying that the central bank’s net reserves are negative or at $3-10bn is becoming manipulation,” Uskuay also observed.
The new definition of manipulation by the BDDK covers everybody and everything from the investor to the broker, the commentator, the man on the internet, the man on the street, information, analysis and the set down content of a commentary, he added.
Former central banker Ugur Gurses, who is considered by the Erdogan media as one of the leading pawns of some lobbies in Turkey, has published an “FX intervention guide” for “those who have a passion to intervene in the exchange rate but who do not have enough experience to do it”.
Some of his basic points are as follows:
· Hike your policy rate
· Never hide your balance sheet
· Never stop releasing a data set that you’ve regularly released
· Don’t carry off-balance sheet assets or liabilities such as swaps
· Don’t forget everyone sees everything
· Your argument of “All reserves are usable” would be stronger in parallel to your transparency
· A discredited central bank’s reserves are always discussed
· Always control whether the currency depreciation is due to FX liquidity
· If depreciation is due to economic fundamentals, leave the exchange rate rather than holding it
· Don’t give the message of “I want more FX” by hiking lenders’ swap limits at volatile times
· If you intervene in the exchange rate under a free-float regime, you give the message of “fear of fluctuation”
· Showing the strong demand via wrong interventions is like inviting “sharks” to the beach
· If you’re applying a free-float regime and, at the same time, you stubbornly want to intervene in the exchange rate, don’t intervene as a “rookie trader” by defending the “resistance” levels, but do it as a central banker
· Never snub your exchange rate policy to a “second hand” even if it is a broker at a state bank.
Register here to continue reading this article and 5 more for free or purchase 12 months full website access including the bne Magazine for just $250/year.
Register to read the bne monthly magazine for free:
Already registered
Password could contain only a-z0-9\+*?[^]$(){}=!<>|:-_ characters and have 8-20 symbols length.
Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.
Forgotten password?
Email field can't be empty.
No user with this email address.
Access recovery request has expired, or you are using the wrong recovery token. Please, try again.
Access recover request has expired. Please, try again.
To continue viewing our content you need to complete the registration process.
Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.
If you have any questions please contact us at sales@intellinews.com
Sorry, but you have used all your free articles fro this month for bne IntelliNews. Subscribe to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free subscription to bne's digital weekly newspaper to subscribers to the online package.
Click here for more subscription options, including to the print version of our flagship monthly magazine:
More subscription options
Take a trial to our premium daily news service aimed at professional investors that covers the 30 countries of emerging Europe:
Get IntelliNews PRO
For any other enquiries about our products or corporate discounts please contact us at sales@intellinews.com
If you no longer wish to receive our emails, unsubscribe here.
Magazine annual electronic subscription
Magazine annual print subscription
Website & Archive annual subscription
Combined package: web access & magazine print annual subscription