© Reuters. FILE PHOTO: Turkey Lira banknotes are seen in this illustration
By Ali Kucukgocmen and Orhan Coskun
ISTANBUL (Reuters) – Turkey secured a triple its currency swap deal with Qatar to $ 15 billion, the central bank said Wednesday, providing much-needed foreign funding to bolster its depleted reserves and help stabilize the Turkish lira.
Ankara had immediately sought access to funds from Doha and elsewhere to stave off a potential currency spiral, and analysts say tens of billions of dollars may be needed. A senior Turkish official said Reuters talks continue.
Turkey’s central bank said the agreement with its Qatari counterpart – which raised the current exchange rate threshold from $ 5 billion – would support financial stability and trade.
Lira touched a historic low earlier this month as investors went over a fall in the central bank’s net foreign exchange reserves and the country’s relatively high foreign debt obligations, accelerating Ankaras overseas funding seeking.
Reuters reported last week that Turkish Treasury and Central Bank officials had appealed to colleagues in Qatar and China to extend existing swap lines and to the United Kingdom and Japan about possibly setting them up.
Turkey has a swap facility of approx. $ 1.7 billion with Beijing.
“Negotiations on swaps are continuing and, in particular, some are in a very positive situation. We expect positive results from them soon as well,” the senior Turkish official said before the central bank’s announcement.
The official who requested anonymity highlighted some of the conversations as ongoing and others as on hold.
It was down 0.2% to 6,795 against the dollar at 0822 GMT on Wednesday.
The Turkish central bank said the amendment to the 2018 swap agreement with Qatar’s central bank aimed to “facilitate bilateral trade” in local currencies and “support the financial stability of the two countries”.
During the construction, the Doha central bank would accept Turkish lira in exchange for Qatari empires.
Turkey has moved on from its preferred source of dollar funding, U.S. The Federal Reserve, which seems unlikely to extend a swap line based on comments from current and former Fed officials.
Commerzbank (DE 🙂 analyst Tatha Ghose said lira rallied after speculation on Tokyo and London deals, but added that swaps are a “secondary story” to the prospects of a rebound in Turkish exports, now that European economies reopens from coronavirus-related lockdowns.
Larger export numbers would “dispel the lira’s current evil, though many problems will remain in the longer term,” he wrote in a client note.
Net foreign exchange reserves in the central bank have fallen to $ 26 billion from $ 40 billion this year, in part because of the state’s FX interventions to help stabilize the lira, analysts said. Turkey’s 12-month foreign debt is $ 168 billion.
Fusion Media or anyone involved with Fusion Media assumes no liability for any loss or damage arising from the reliance on the information, including data, offers, charts and the purchase / sale of signals on this site. Be fully informed about the risks and costs associated with trading in the financial markets, it is one of the most risky types of investment.