Turkey is slowly becoming Argentina

The Turkish lira fell under immense pressure after the Financial Times reported the Turkish central bank (CBRT) used billions of dollars in short-term borrowing to bulk out its reserves.  At one point, the lira was down 2% to the dollar, the lowest levels since October 2018.  Concerns remain high on government’s management of their finances and comparisons are being drawn that Turkey could become Argentina.

Turkey may be too sure that they can fight off any future lira crisis, but if the reserve data continues to remain low, Turkey could in trouble.  The net reserves stood at $28.7 billion last week, but when you pull out the short-term swaps, it ended up being only $16 billion.

Turkey is in a recession and if we see further weakness from the eurozone, we could see further strains on Turkey’s economic data in the next couple months.  Turkey can still finance their internal position, but we could see this go in to panic mode if their situation continues to deteriorate.

 

 

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya