As Turkey on May 7 blocked three global banks from trading Turkish lira (TRY) in an effort to stem the slide of the currency as it hit a record low, analysts discussed whether Ankara might be tempted to bring in capital controls, a prospect the Erdogan administration has explicitly ruled out.
Aykan Erdemir, senior director of the Turkey Program at The Foundation for Defense of Democracies, tweeted: “The move has heightened suspicions that Turkey might next turn to CapitalControls in an effort to deflect lira weakness.”
“Good luck with convincing the world capital controls are off the table now,” said Paul McNamara, an investment director at the asset manager GAM, in the wake of the move by Turkey’s banking regulator to forbid Citigroup, BNP Paribas and UBS from processing Turkish lira (TRY) transactions.
The TRY fell in May 7 afternoon trading to as far as 7.2685 to the USD, compared to the nadir of 7.2362 seen during the August 2018 currency crisis. However, by the end of the day it recovered to around 7.09. The lira has lost around 15% of its value against the dollar in the year to date. Across 2018 and 2019 it lost 36%.
After the currency fell to its new all-time low, pro-Erdogan administration media painted the situation as caused by manipulative market practices pursued by London-based financial institutions that amounted to an orchestrated attack.
Yaman Akdeniz, a lawyer and academic based at Istanbul’s Bilgi University, responded to new regulatory strictures from Turkish banking watchdog BDDK by saying: “In short, they [Erdogan officials] are telling experts—banks, the media or anybody interested in financial issues—not to talk about the financial crisis ongoing in Turkey.”
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