How Ankara “tamed” the currency market? A case study in absurdity

TURKEY - In Brief 27 Mar 2019 by Atilla Yesilada

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I had to delay my plan to say the final word on approaching municipal elections to Thursday, on account of the bizarre measures taken by the Turkish authorities to defend the currency and their permanency.As I write these lines Turkish sources reported (quoting Reuters) that the emergency measures were temporary, most probably to be rescinded after the elections.I believe this to be the case, too, but am afraid that it will be too late.Trust is broken and another very damaging episode of TL weakness possibly underway.I urge members of audience who don’t monitor Turkey on a daily basis to read the linked Bloomberg article titled “Turkey Feels Backlash of Trapping Investors Before Elections”, from which a brief quote is necessary to set the stage:“By engineering a situation whereby there isn’t enough lira liquidity for investors to move in and out easily, Turkish authorities have averted a currency slide before a March 31 vote that’ll determine who governs Turkey’s cities. That may be good for Erdogan, but at the cost of inflicting huge pain on the investors he needs to sustain the economy. The rate they have to pay to borrow overnight liras jumped to 1000 percent on Wednesday.“I’ve never seen a move like this in the 21 years I’ve been watching this market,” said Julian Rimmer, a trader at Investec Bank Plc in London. “This amounts to sacrificing long-term pragmatism for a short-term political expedient. Such tactics will make many traders question the investability of the lira.”Another article in FT states:“One London-based analyst, who asked not to be named, said Turkish banks were telling him they had been ordered “not to lend even a single lira to foreign counterpart...