"God Help Turkey": FX Confiscation Rumors Launch Lira Meltdown As Yields Explode

While Turkey may have repatriated all of its gold held at the NY Fed, or at least moved it from New York to the BIS tower in Basel as we reported overnight, what markets are far more concerned about is the ongoing inactivity by the central bank to arrest the record collapse in the Turkish Lira and the just as record surge in Turkish 10Y yields, which in light of Erdogan's threats on the "independent" central bank, which is now terrified to hike rates, is perhaps understandable.

It is therefore also understandable why, as Bloomberg reports this morning, one brokerage is looking for help from a higher power: "God help Turkey" Istanbul-based broker Alnus Yatirim said in the sign-off to its morning note to clients on Monday. "We’re faced with a central bank that is watching the market when it needs to lead and direct it."

Yatirim has a point: on today's Bloomberg EM Bloodbath chart, the TRY is once again the worst performing currency against the USD...

... as the Turkish Lira drops to a fresh all time low, just shy of 4.60 against the USD.

The brokerage predicted that the TRY could fall to 4.58 per dollar by the end of this week - or rather the start as it is already there now, give or take - and 4.75 next week.

The market is testing whether the central bank’s verbal interventions are a bluff or not, Alnus said. Without policy action, the damage is likely to spiral, it said, citing the $222 billion of net debt held by Turkish non-financial companies in overseas currencies. Each 1 cent depreciation in the currency adds about 5 billion liras to the cost of Turkey’s foreign borrowings, it said.

Adding to an already dire picture, overnight rumors emerged that the government will seize foreign currency deposits although Turkey’s banking regulator chief Mehmet Ali Akben said such speculation is "absurd," Sabah newspaper reported. "Such a decision is neither discussed or a work has been done on it" he said noting that banks’ rollover ratio is around 110%, and adding that they have no problem in foreign borrowing ("for now" he forgot to add).

Although just as one Turkish official was about to sound somewhat credible, he added that similar speculations are being made before every election and accused credit rating agencies of trying to spread negative mood. He also said that the Turkish banking system is strong, although one look at today's 10Y Turkish yield which just hit an all time high of 15%, may suggest otherwise.

The good news, at least for now, is that Turkish stocks haven't followed the meltdown, with the Borsa Istanbul 100 Index down 0.3% in early trading, wiping out nearly half of last week's gain, when investors poured $10.3MM into New York and London-traded Turkey stocks ETFs in the week ended May 18, the biggest weekly inflow since Oct. 13.

We doubt stocks will be spared for long, however, and the moment Erdogan starts speaking in the next 24 hours is when the real selling will begin even as Turkey inches ever closer to soaring, Venezuela-style inflation.

Comments

NidStyles Cognitive Dissonance Mon, 05/21/2018 - 08:18 Permalink

Considering I probably caused this, it’s well within my control.

 

Zuckerburg is playing games with peoples lives along with Soros. I brought up visiting Turkey this past weekend on Facebook. I don’t have anything but enemies in that crowd. 

See schlomo, this is how you piss off your allies and get shoahed. I am under zero obligations to keep your secrets. 

In reply to by Cognitive Dissonance

NidStyles LiteBeeer Mon, 05/21/2018 - 09:22 Permalink

Here’s the thing, Israel is a nation of people, not lines on a geopolitical map. 

Israel at this current moment doesn’t actually exist, only the Anti-Christ can make it return, right before the Messiah returns. The Anti-Christ does the dirty work for the Messiah.

 

It would be nice if people would actually read the material they are supposedly following.

 

That verse in Numbers also has a specific period in question, mainly that day has already passed until the Anti-Christ appears.

In reply to by LiteBeeer

veritas semper… philipat Mon, 05/21/2018 - 14:14 Permalink

Turkey is attacked for a few simple to understand reasons:

-it is allied with Russia ,Iran ,Syria now

-it  does not allow the use of Incirlik by the US  against Syria

-it is opposed the use of the PKK kurdish terrorists( and SDF is Pkk)  by US against Syria and the creation of another Israhell there

-it is ready to give the boot to the petro-f*ckin-dollar ( the reason it repatriated all their Gold)

-it has a lot of Gold

-it will have a great leverage with the South Stream

-it expressed its disgust with the last Israhelli massacre in Gaza ( toll 'til now 64 dead ,> 3000 wounded)

-it was not permitted to air lift the Palestinian wounded and treat them in Turkish hospitals

-it accused US of being behind this last mass murder ( and rightfully )

-it has the second big ,modern army in NATO and its position in the ME is vital for NATO/US ;

See how easy is to understand the movement of chess pieces on the " Grand Chessboard" ; only if you want and get rid of the American exceptionalism and the R vs D paradigm.

In reply to by philipat

Aussiekiwi Mon, 05/21/2018 - 07:46 Permalink

I wondered how they were going to pull Turkey into line, attack its currency, destroy its economy and it won't be quite so adventurous militarily.

silver140 Aussiekiwi Mon, 05/21/2018 - 08:55 Permalink

Exactly. Erdogan is in the cross hairs. The same economic hit squad being used against Venezuela and any other country or leader that gets a bit uppity. He is an egotistical, repulsive, covert islamic jihad POS, although I do hope he goes quick so as to lessen the destruction of the country. It's possible the Syrian model will be used if he is stubborn. It seems obvious that the ME, for the last few decades, the cradle of human civilization has been targeted for decimation by the parasitoid corporate fascists . Wipe out humanity's history, its ancient cultures and artifacts and you lessen the human will to survive.

A parasitoid is an organism that lives in close association with its host and at the host's expense, and which sooner or later kills it.

In reply to by Aussiekiwi