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TURKEY: Central Bank Lowers FX-Lira Swap Limit in Bid to Reduce TRY Liquidity

TURKEY
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The central bank is making fewer liras available to commercial lenders, a move that could force them to source local currency elsewhere and reverse the recent decline in deposit rates, Bloomberg report. The monetary authority reduced the limit on foreign exchange-lira swaps and revoked some lira-gold swap auctions, according to circulars it sent to financial institutions and seen by Bloomberg News.

  • "Authorities have used both transaction types to lend liras to financial institutions in return for FX and gold. The total amount of FX-swaps banks can execute with the monetary authority will now be capped at 0.5% of their daily FX market limits, down from 3% previously. The move will reduce the amount of local currency banks can borrow from the monetary authority and could therefore result in higher deposit rates." (Bloomberg)
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The central bank is making fewer liras available to commercial lenders, a move that could force them to source local currency elsewhere and reverse the recent decline in deposit rates, Bloomberg report. The monetary authority reduced the limit on foreign exchange-lira swaps and revoked some lira-gold swap auctions, according to circulars it sent to financial institutions and seen by Bloomberg News.

  • "Authorities have used both transaction types to lend liras to financial institutions in return for FX and gold. The total amount of FX-swaps banks can execute with the monetary authority will now be capped at 0.5% of their daily FX market limits, down from 3% previously. The move will reduce the amount of local currency banks can borrow from the monetary authority and could therefore result in higher deposit rates." (Bloomberg)