SWAP MARKETS MOBILIZED BEFORE THE ELECTIONS
Unusual conditions in foreign over-the-counter FX swap markets do not reflect the true picture of Turkish lira markets, Turkey’s Borsa Istanbul noted on March 28. These conditions cause uncalled-for price movements, it said in a statement, adding: “Pricing is continuing in a healthy way as usual in the swap market of our stock exchange.”
Accessing domestic markets from the foreign over-thecounter market would contribute to healthy pricing, the statement added. “Foreign banks which are active in Turkey and members of Borsa Istanbul markets and institutions which are active in foreign over-the-counter markets can transact in our stock exchange. We invite all market players,” it concluded. Under Turkey’s New Economy Program, announced in September 2018, one of Borsa Istanbul’s chief strategies is creating markets for managing the risks of Turkey’s financial institutions, the press release noted. It added that Borsa Istanbul continues to work to create liquid and efficient markets in line with international standards.
“One of the significant results of the G20 Pittsburgh summit [in 2009] was including Over-the-Counter markets’ derivative transactions in centralized exchange markets,” said the press release.
The Borsa Istanbul FX Swap Market, established last October, has so far reached a transaction volume of $40 billion. Over-the-counter markets mean unorganized markets which usually list companies that cannot meet stock exchange listing requirements.
On the other hand, Turkey’s president on March 28 accused the West, particularly the U.S., of trying to make things difficult for Turkey before the March 31 local elections. Exchange rate fluctuations are an operation by the West, particularly the U.S., to paint Turkey into a corner, Recep Tayyip Erdogan said in a televised interview. Such attempts to manipulate exchange rates are a political imposition before the looming local polls, he added.
The USD/TRY exchange rate stood below 5.60 as of 3 p.m. local time (1200GMT) on March 28, after it reached 5.70 in previous days. The USD/TRY was around 5.40 by market close on March 27 and one dollar was worth TRY 5.38 at the beginning of this year.
In the meantime, Turkey’s Central Bank on March 28 increased the transaction limit of total swap sales which have not matured in the Turkish lira currency swap market.
Lenders’ limits will be 30 percent of their pre-determined Foreign Exchange and Banknotes Market transaction limits, up from 20 percent for non-matured transactions, according to a statement from the Central Bank.
On March 25, the limit was raised to 20 percent from 10 percent.