October 09, 2023 15:03 GMT
Officials Will Not Ease Cap on Swap Deals
- Turkish authorities won’t ease a cap on swaps deals in the near-term amid concerns over a weakening lira, Bloomberg have reported citing people with knowledge of the discussions.
- Removing the cap on overseas lira supply at this point could risk an increase in short-selling activity, which the nation’s economic leadership is concerned about, they said. But, policymakers will consider relaxing the limits after achieving a strong interest-rate buffer over the inflation rate.
- In 2020, authorities sought to control liquidity in the offshore market by limiting currency swaps, options, futures, forwards and other derivative contracts entered into with overseas counterparties by a Turkish bank or financial institution to 1% of its equity capital, Bloomberg write, adding that the measure was eased a couple times later. Authorities also kept borrowing costs well below inflation in an attempt to keep the economy growing as Erdogan sought a third term in office in May’s elections.