JP Morgan, Citibank attacking Turkish lira - pro-govt Hürriyet

A prominent Turkish pro-government newspaper has accused international banks and news outlets of leading an operation to devalue the Turkish lira in order to influence the rerun of Istanbul’s mayoral election.

On Friday Hürriyet newspaper quoted unnamed economists as saying U.S. multinational banks JP Morgan and Citibank were leading a group that has set its sights on the lira again after several previous attempts to weaken the currency.

Hürriyet quoted the economist as saying the banks had used Bloomberg, Reuters and the Financial Times in an operation designed to sully perceptions of Turkey after the Supreme Election Council’s decision on Monday to rerun the local election.

The secularist opposition candidate Ekrem İmamoğlu won the city on March 31, but Turkey’s ruling Justice and Development Party (AKP) government pushed to have the result cancelled, claiming “serious irregularities” had taken place during the first vote.

Before the decision was taken, analysts had warned that the uncertainty caused by another crucial election would negatively impact the lira, and the currency acted as expected, sliding to its lowest levels since September this week.

Economists have also expressed concern over reports that state banks as well as the central bank have been selling their foreign reserves in order to prop up the lira.

Hürriyet, however, lauded the central bank’s intervention on Thursday, when it temporarily suspended the benchmark interest rate of 24 percent, forcing banks to borrow at a rate of 25.5 percent instead in an attempt to shore up the embattled lira.

After falling to around 6.25 against the dollar on Thursday, the lira made gains on Friday, rising to 6.07 by 7 p.m. local time (GMT +2).

The recovery brings the lira to around the level it reached on Tuesday, the morning after the decision to rerun the election was announced. It had been trading at less than 6 against the dollar on Monday.

In a report on Wednesday, ABN Amro economist Nora Neuteboom warned that the lira was exposed to further weakness due to domestic political tensions, an argument with the United States over the planned purchase of S-400 missiles from Russia, and central bank policy, which she said meant that net foreign currency reserves, excluding currency swaps, had fallen to just $11 billion.

These have been long running issues in Turkey, which slid into recession in the last quarter of 2018 and continues to struggle with high inflation and unemployment as well as the lira fluctuations.

AKP officials including Finance and Treasury Minister Berat Albayrak have accused foreign powers of undertaking speculative attacks on the lira.

In March, Turkey’s Banking Regulation and Supervision Agency launched an investigation into JP Morgan after the bank published a report on Turkey for its investors. The Turkish regulator said the report had hurt the reputation of Turkish banks.

Analysts have said the decision to rerun the Istanbul election is likely to extend the period of uncertainty around Turkey’s economy, as it is likely to delay long-awaited economic reforms and contribute to investors’ fears around Turkey’s rule of law.