Turkey Requests Banks to Delay Dollar Acquisitions Until Next Week

Turkey's central bank has asked commercial lenders to refrain from carrying out large dollar purchases on behalf of their corporate clients until Monday, according to people familiar with the matter.

Regulators are reportedly trying to ease the pressure on firms that are trying to accumulate foreign currency at the end of the year, according to sources who spoke to Reuters on Wednesday. The central bank has declined to comment on the matter.

The lira was trading 0.1% lower at 18.7136 per dollar as of 2 p.m. in Istanbul, on track for its lowest weekly close on record, according to data compiled by Bloomberg. The currency has declined by 29% this year, making it the worst performer among emerging market peers after the Argentine peso.

Turkish policy makers see the lira’s stability as key to keeping consumer prices under control after inflation peaked at over 85%. The currency’s weakness is mostly due to two rounds of interest rate cut cycles that were carried out last year and in 2022, which has helped to fan inflation.

Turkey's central bank has warned lenders against raising deposit rates, saying that such a move could lead to financial instability. The bank's governor, Erdem Basci, said that while higher rates could attract more deposits, they could also lead to a "bank run" if depositors became concerned about the safety of their money.

The monetary authority has issued a separate instruction to stop lenders from using derivatives and options that would eventually allow lira deposits to create new demands for foreign currency, according to a central bank circular seen by Bloomberg.

The Turkish central bank lowered its policy rate by 500 basis points to 9% during a four-month long easing cycle that came to an end in November. This was despite inflation being 17 times the official target of 5%. President Recep Tayyip Erdogan pushed for these rate cuts, believing they would boost economic output and exports.

Governor Sahap Kavcioglu has said that higher investments will eventually result in a balanced current account, which will in turn stabilize consumer prices in the long term. This is a positive development for the economy, as it will help to keep inflation in check and encourage more spending and investment.

In order to support the lira and channel new credit into high priority sectors such as manufacturing, the monetary authority has enlisted additional measures. These measures and currency interventions have kept the lira in a narrow trading range over the past three months.

There are a few key metrics that can be used to gauge the health of a market.

The first is market size, which can be measured by the total value of all the assets in the market.

‍The second is market liquidity, which refers to the ease with which assets can be bought and sold in the market.

‍The third is market efficiency, which is a measure of how well the market functions in terms of allocating resources.