Turkey central bank raises lira swap transaction limits in auctions – report

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Turkey’s central bank raised limits for forex-lira swap market transactions in auctions to 60 percent of bank’s foreign exchange market transactions from a previous 50 percent, the state-run Anadolu news agency reported on Thursday.

The central bank has increased the limit from 20 percent in April as it sought to raise more foreign currency via swap arrangements with local banks to bolster its reserves.

Turkey has sought more firepower to defend the lira after the currency fell to successive lows against the dollar this year. Its foreign currency reserves, net of liabilities, stand deeply in negative territory.

decision in April to raise the forex-lira swap limit to 30 percent from 20 percent had meant an increase of about $5 billion in the volume of such transactions, Reuters reported at the time.

Earlier this month, Turkey also eased swap limits for banks trading with foreign financial institutions, in a move welcomed by foreign investors.

Banks may now sell liras worth up to 5 percent of their equity to foreign entities for transactions that mature in seven days, 10 percent for transactions maturing in a month and 30 percent for those maturing in a year. That step was welcomed as a sign of the central bank’s renewed adherence to free market principles, although investors said it may pressure the central bank’s foreign currency reserve levels in the short term.

The central bank’s net foreign exchange reserves, minus swaps, have fallen to a negative $46.5 billion from $22.7 billion at the end of last year, ratings agency Fitch said last week.

Ahval

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