Turkey bank allows more swap deals to boost foreign currency reserves
Turkey’s central bank moved to boost its foreign currency reserves by allowing an increase in banks’ swap deals, Bloomberg reported on Tuesday.
The measure covers lending in foreign currency to the central bank via short-term swaps, Bloomberg said, citing a copy of the directive. The transactions were capped at 20 percent of total foreign exchange market transactions, it said.
The move will allow banks to deposit more of their foreign currency with the central bank, while they borrow liras in return, increasing Turkey’s gross foreign exchange reserves.
But the measure will come at the expense of the bank’s net reserves, Tim Ash, chief emerging markets strategist at BlueBay Asset Management in London, said in e-mailed comments.
Investors in Turkey have become concerned about the level of the central bank’s foreign currency reserves after it was forced to defend the lira following a currency crisis in the summer of 2018. The lira has lost more than 35 percent of its value since the crisis erupted.
The lira traded down 0.3 percent at 6.14 per dollar in late afternoon trading local time in Istanbul, paring some of its earlier losses. It has lost about 3 percent of its value this year.