Lira Surges After Qatar Pledges To Invest $15 Billion In Turkey

The Turkish Lira, which has been rising all day after an earlier attempt by Ankara to crush shorts by reducing the amount of swap transactions to just 25% of bank capital, down from 50% - a move right out of the PBOC playbook which forces a short squeeze - got another boost moments ago when Anadolu news agency reported that Qatar has pledged $15 billion in direct investment in Turkey. From Anadolu:

Qatari Ambassador to Turkey Salem bin Mubarak Al Shafi said his country would continue supporting Turkey following recently-imposed U.S. sanctions on the country. “The State of Qatar is always proactive in supporting its Turkish brothers,” Al Shafi told Anadolu Agency on Wednesday. Qatar, he said, would continue supporting Turkey, as it did during the defeated coup attempt in mid-2016.

Ankara and Doha, he added, shared common points of view on a number of regional and international issues.

Al Shafi went on to note that Qatari Emir Tamim bin Hamad’s visit to Turkey on Wednesday demonstrated the “depth of Qatar-Turkey relations”.

The emir’s visit, the diplomat said, “will serve to confirm the close links between the Qatari and Turkish people and their common positions vis-à-vis the many challenges they face”.

According to Al Shafi, Qataris have recently bought tens of millions of dollars’ worth of Turkish lira with a view to supporting the Turkish economy. Describing Turkey as a “strategic ally”, the ambassador added: “Our strong relations with the Republic of Turkey enjoy a special status among our people.”

Separately, the Turkish Capital Markets Board regulator announced that they set the leverage ratio in the Lira FX market has been set at 1:1 until Sept. 3. The regulator cites “serious price moves” in such pairs recently that are devoid of a rational economic or financial reason, and notes that the step targets to prevent grievances that may occur after Feast of Sacrifice holiday, during which Turkish markets will be closed.

The question of course, is who is more levered: the shorts or the longs, because after the Lira spiked on the Qatar news, it has faded much of the move higher, potentially as levered longs outnumber shorts, and are forced to sell.