Lira tumbles as Turkish companies rush to buy dollars
(Bloomberg) — The lira led declines across emerging markets as Turkish companies rushed to buy dollars after a rally late last week. Losses accelerated on a report the Treasury is planning to tap the central bank’s local-currency reserves.
As of early Monday, companies bought around $300 million, according to three people with knowledge of the transactions, who asked not to be named because the information isn’t public. Bouts of strength are seen as an opportunity to scoop up dollars for Turkish companies saddled with a $315 billion foreign-exchange debt pile.
The lira — already being sold off as part of a global rout — pushed past the psychologically important mark of 6 per dollar. It traded 1.9% weaker at 6.1010 against the U.S. currency as of 4:15 p.m. in Istanbul after touching a one-week high of 5.9571 on Friday.
Adding to the pressure on the currency was a Reuters report that Turkey’s Treasury and Finance Ministry is contemplating borrowing about 40 billion liras ($6.5 billion) from the central bank’s so-called reserve fund, where it keeps some of its annual profit. The report spooked investors as it suggests that Turkey’s fiscal standing is deteriorating, and is fueling concern that the government is using the monetary authority to finance its deficit.
Officials at the central bank and Turkey’s Treasury and Finance Ministry didn’t have any immediate comments when asked about the report.
As of February, Turkey’s non-financial companies’ hard-currency liabilities exceeded their foreign-exchange assets by $197 billion, equivalent to about a quarter of gross domestic product, central bank data show.