Turkey exempts Clearstream, Euroclear Bank from lira trading curbs

Turkey’s banking authority exempted Clearstream and Euroclear Bank from restrictions on lira transactions between local banks and foreign financial institutions.

Clearstream and Euroclear halted Turkish lira trading over a shared platform known as the Bridge last week, saying they were unable to settle transactions satisfactorily due to liquidity restrictions.

Earlier this month, the banking regulator limited local banks’ trading in liras with foreign financial institutions, including via depo, repo transactions and loans, to 0.5 percent of their capital.

The regulator said Wednesday’s move was designed to protect the clearing of bonds denominated in liras and to guarantee that lira securities were traded efficiently.

Turkey has sought to control trading in the lira by restricting transactions in the offshore markets, where foreign financial institutions sometimes short or hedge the currency. It has implemented such measures as the central bank spent tens of billions of dollars of its foreign currency reserves in the lira’s defence.

The lira slumped to a record low of 7.269 per dollar on May 7. It has since strengthened to trade at around 6.8 against the U.S. currency.