Turkish state bank sold around $4.5 billion to support weakening lira

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Turkish state bank sold around $4.5 billion to support weakening lira

Last week, the State Bank of Turkey had sold more than $4.5 billion, including a wave of steep sell-off during the late trading hours on Friday (May 10th), as a move to support the much-softer Turkish currency and to prevent further decline ahead of an Istanbul’s mayoral election.

On Friday’s (May 10th) market closure, the Turkish lira had rounded off the day at 5.9955 lira against the American dollar, after breaching its weakest level in more than seven months at 6.2460 on Thursday (May 9th).

Nevertheless, the US lender, JPMorgan Chase and Co. had written in a client note on late-March that the Turkish Lira would likely to be plunged heavily following its latest local election and suggested its customers to stay in a long-buy position.

In point of fact, followed by its local election that rattled Erdogan’s position on Istanbul further, the Turkish Lira had lost around 7.5 percent against American dollar so far, which largely prompted the Turkish central bank to intervene into the FX market.

At least four sources with knowledge regarding the issued had confirmed on Saturday (May 11th) that the bank had intervened throughout last week to protect Lira, while the latest intervention had been witnessed somewhere between GMT 18.00-20.00 on Friday (May 10th).

Adding that there had been two instances of Central Bank intervention on Friday’s (May 10th) market, a senior forex analyst at a US lender said in terms of anonymity, “We clearly started to notice Turkish banks are in the market after the lira firmed to 6.10 against dollar on Friday.

Banks offered U.S. dollars until the market was completely illiquid”. As of now, Turkish Lira had lost 15 percent against the American dollar this year with further losses appeared to be on the card following Istanbul’s mayoral election, analysts suggested.