Turkey shifts from hospitality to hostility, increasing lira concerns – Economist

Turkey has shown how investing in emerging markets can be an unpredictable business by banning Citigroup, UBS and BNP Paribas from trading in the foreign currency markets this month, the Economist said.

Turkey switched from hospitality to hostility when Treasury and Finance Minister Berat Albayrak first took part in a teleconference with investors that the three banks helped host only for the country’s banking watchdog to bar them from trading in the lira the very next day, the Economist reported on Thursday.

Four days later the trio of banks were allowed back into the market.

“Policymakers in emerging markets frequently complain that foreign capital is fickle. But foreign capital could be forgiven for having a similar gripe about emerging markets,” the Economist said.

The shifts in demeanour by Turkey reflect a consistent concern about the lira, which dropped to a record low of 7.27 per dollar last week, the Economist said.

The currency traded at 6.91 per dollar on Friday, down 14 percent this year.

Turkey’s government frequently accuses foreign financial institutions of seeking to undermine its economy. But at the same time, the authorities have made the lira less attractive to investors by pursuing unorthodox and often unpredictable economic policies. Those have included frequent interventions in the foreign exchange markets by state-run banks and big rate cuts by the central bank.