Turkey Spends $12 Billion to Defend Lira From War-Fueled Turmoil

fv12bpw(4ym6k5oa14bi(a[8_media_dl_1.png BloombergArticle content(Bloomberg) — Turkey has spent $12 billion, equal to roughly 15% of its foreign-currency reserves, to keep the lira stable during a week of global market volatility triggered by the war in Iran.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe Turkish central bank tightened liquidity conditions before markets opened on Monday and, when trading began, lenders stepped in to sell dollars to deter volatility, according to traders familiar with the deals, who asked not to be identified due to the private nature of the transactions. The amount of dollar sales declined throughout the week with no such transactions observed on Thursday, they said.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentAs a result, the lira has stayed calm at a time when most other emerging-market currencies tumbled.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article content“For the time being, we think that’s a sustainable policy,” said Nick Eisinger, head of emerging-market sovereign strategy at JPMorgan Chase & Co.’s asset-management division. “They have decent ammunition to be able to carry on doing that but this is obviously why the whole longevity around what’s going on with Iran is so important.”Article contentEisinger’s view is that if the heightened-risk environment lasts a week or two then “by and large the dust should settle and we can probably get back to some degree of normality.” If not, prospects become “much harder for a lot of risk assets globally.”Article contentThe dollar sales have made the lira one of the best performing emerging-market currencies this week, with a 0.1 decline against the dollar. Turkish policymakers are managing a gradual depreciation of the lira, seeking to provide a degree of predictability for businesses and investors as domestic price growth moderates.Article content‘Small Exit Door’Article contentThe Turkish central bank’s net foreign-currency reserves, excluding swaps lines it has with lenders, stood at $78.4 billion last Friday. Combined with the monetary authority’s gold holdings, it has roughly $200 billion in its coffers.Article contentArticle contentThe central bank declined to comment on foreign-exchange policy.Article contentA member of the US-led NATO military alliance, Turkey is vulnerable to the conflict in the Middle East due to its proximity to Iran and its dependence on energy imports. Crude oil prices have jumped 16% since the war started last Saturday. Article contentBill Campbell, a portfolio manager at DoubleLine Group LP, is underweight Turkish bonds, saying the market is vulnerable to geopolitical shocks “It might be a very small exit door if the sentiment turns,” he said. Article contentThis week’s interventions are smaller than last April, when the authorities ultimately spent over $50 billion in reserves to stabilize the currency and the central bank raised rates to calm markets following the jailing of Istanbul Mayor Ekrem Imamoglu — President Recep Tayyip Erdogan’s most prominent political opponent. Article content“Turkish lira’s moves have so far been contained,” Goldman Sachs Group Inc. analysts, led by Kamakshya Trivedi, wrote in a note on Wednesday. “The central bank has large enough reserves to continue” for now, but the stance would become “less sustainable” if the shocks continue, they added.Article content—With assistance from Selcuk Gokoluk and Tugce Ozsoy.Article contentTrending Posthaste: Canada loses to the U.S. again, but this time it's not in the hockey rink News These eight charts show 'rupture' with Canada under Trump's tariffs Economy Posthaste: This dormant pipeline needs to be restarted for the sake of Canada, economists say News Bank of Canada governor warns of growing risks to financial stability Economy CNRL says it will delay $8-billion mine expansion until carbon pricing rules are clear Oil & Gas Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. 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