Ankara in talks with four countries for swap deals
The Turkish Lira cheered Central Bank Governor Şahap Kavcıoğlu’s announcement late on June 22 that the country was in talks to secure currency swap agreements with four countries and was close to a deal with two of them.
Kavcıoğlu’s remarks came during a meeting with bank executives, according to media reports.
Last year, Turkey also tripled its currency-swap agreement with Qatar to $15 billion.
Kavcıoğlu did not specify which countries Turkey was in talks with, but said during a meeting with managers of banks in the Turkish Banks Association (TBB) that it was at “a very good place” with two central banks, the participants told Reuters.
Turkey’s foreign reserves plunged significantly last year, raising concerns about a possible balance of payments problem, which the government has dismissed.
Kavcıoğlu said the Central Bank was committed to its goal of strengthening its reserves, the participants said.
A year ago, Turkey appealed to foreign allies for new swap funding but secured little. Last June, the Central Bank said it had used its funding facility for Chinese yuan for the first time under the prior swap agreement with the People’s Bank of China.
Interest rate hikes starting in September briefly eased the economic pressure, though the ailing lira has been hovering around record lows in recent weeks.
Kavcıoğlu told the bank managers that the Central Bank would maintain a tight monetary stance and take the policy steps needed to protect the ailing lira currency, the two participants said. He said the bank may make changes to policies on required reserves in order to boost the lira.
In a statement, the TBB said Kavcıoğlu and the bank managers had exchanged views regarding the second half of the year in a “productive and useful” meeting.
Turkey’s benchmark stock index opened at 1,415.44 points yesterday, increasing 0.4 percent or 5.59 points from the previous close. At June 22’s close, Borsa Istanbul’s BIST 100 index was up 0.8 percent with a daily trading volume of 13.3 billion liras ($1.5 billion).
One U.S. dollar traded for 8.64 liras yesterday morning, down from 8.66 in the previous day. In the afternoon, the lira recovered furthermore to 8.64 against the greenback.
The euro/lira exchange rate floated around 10.30, versus 10.32 a day before.
Meanwhile, emerging markets stocks jumped 1 percent after U.S. Federal Reserve Chairman Jerome Powell calmed concerns over policy tightening.
MSCI’s index of EM shares was set for its best session in three weeks after Powell sounded dovish in his testimony to U.S. Congress, saying inflation would not be the only determinant in interest rates decisions.
On May 28, the Turkish Central Bank announced that it reserves amounted to $88 billion at the end of April.
Total reserve assets increased 1.5 percent from the previous month, according to the bank’s international reserves and foreign currency liquidity report.
Foreign currency reserves were at $45.5 billion, dropping 1.6 percent from March.
In April, the bank’s gold reserves rose 5.1 percent on a monthly basis to $40.9 billion.
Short-term predetermined net drains of the government and the Central Bank, including foreign currency loans, securities, and foreign exchange deposit liabilities, increased by 1 percent to stand at $27 billion, the report said.
Outstanding foreign exchange and gold liabilities arising from the Central Bank’s financial derivative activities with resident and non-resident banks stood at $60.7 billion, of which $21.2 billion were due in one month, the report added.