The Turkish lira is recording huge volatility today. The start of the day saw a sizable appreciation of Turkey's currency, which was reacting to Friday's announcement that the banking regulator has introduced new rules requiring domestic banks to assign a very high risk weight (500%) to TRY loans to foreign investors. The rationale behind this move is that it will reduce TRY liquidity abroad and make it more difficult for foreign investors to borrow in lira with the intention of selling it in the markets. Nevertheless, the scale of the USDTRY pair's sell-off has now been more than negated.
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Create account Try a demo Download mobile app Download mobile appTurkey has also announced measures to freeze Turkish lira (TRY) loans for domestic companies that hold more than 15 million TRY (890 thousand USD) in foreign currency or 10% of their holdings in foreign currency. According to a Bloomberg agency source, the number of companies that meet the financial conditions and are independently audited currently stands at nearly 10000.
This could be the first step towards further capital controls to prevent speculation in the Turkish currency, which has lost more than 20% of its value this year. The solution could force companies with foreign assets to sell them, which will create demand for the Turkish lira to comply with the new law. A potential factor that could have further encouraged the demand side to buy the lira at this time was the fact that the benchmark rate was left unchanged at 14% (Thursday, June 23).
The chart of the currency pair USDTRY, D1 interval. Friday's regulatory announcement triggered a wave of appreciation of the lira, which has gained more than 7.5% since Friday's apogee. However, today's sudden continuation movement was interrupted and the lira is currently weakening against the US dollar. Source: xStation 5
