Turkey’s state banks sold $1bn on May 9 and overnight to curb the latest bout of depreciation in the Turkish lira, unnamed sources familiar with the issue told Reuters on May 10. The selling was reportedly led by Ziraat Bank, the country’s largest lender by assets.

Turkish lenders were selling dollars and buying lira below the prevailing market bids in Asia during the early trading hours of May 10 to give maximum impact to their purchases while the market was caught off-guard by the transactions, unnamed Asian traders told Bloomberg on May 10.

On May 7, three unnamed people with knowledge of the transactions told Bloomberg that government-run banks sold as much as $1bn over the 24 hours that followed the High Election Board’s (YSK’s) decision to re-run the Istanbul mayoral election, which the Erdogan administration-backed candidate lost to the main opposition’s challenger.

Turkish government exchange rate manipulations via public lenders’ direct sales to the market along with the central bank’s forward contract sales on the Borsa Istanbul’s derivatives markets have been the reality since mid-November.

However, leading financial news services have now for the first time reported what has long been the talk of the town.

The Erdogan government has also been manipulating rates on the domestic government bonds market as well as local lenders’ deposit and lending rates since November.

Waking up
If Turkish President Recep Tayyip Erdogan, once a darling of international investors, keeps baulking at policy rate hikes, global media outlets could be expected to wake up soon to his government’s interest rate manipulations. The extent of his administration’s alleged crimes against humanity might also get the airing they deserve in mainstream news coverage.

Bloomberg showed signs of waking up on this front on May 8 when it published an op-ed by Eli Lake focused on the Istanbul election re-run entitled “Trump Can’t Let Erdogan Get Away With This” and referred to how “during the Obama years, Erdogan allowed his territory to be used by the Islamic State to establish pipelines of new recruits from Europe into the group’s proto-Caliphate”.

Lake’s mention of the Erdogan–Islamic State situation with a few words in passing came six years after the rise of Islamic State, more than two years after former US President Barack Obama left his post and about one year after the essential fall of Islamic State.

However, it coincided with a time in which global finance is pressing Erdogan for a rate hike.

Currently, Erdogan is in talks with the US over the Syrian Kurds. He could break the rate hike campaigners’ hearts if he could strike a deal that would remove Donald Trump’s Sword of Damocles hanging over the lira’s head.

Also notable is how Paul McNamara of GAM promoted Turkey on May 10 in an op-ed for the Financial Times entitled “EM currency falls bring big opportunities for investors”.

McNamara stated “local-currency markets generate triple the average return in the year following a crisis” adding that “Turkey probably has the easier path towards recovery” compared to Argentina.

“Its relatively open economy and position as a manufacturing hub on Europe’s doorstep make generating foreign exchange much easier. The country has a significantly lower external debt burden, and the public finances are healthy. The private banks have been able to roll over external debt, albeit in chunks. The country’s dysfunctional politics and erratic leaders seem intent on derailing a return to growth, but trade and the luck of location should come to Turkey’s support,” he wrote.