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Fall in Turkish foreign reserves suggests lira intervention

By Jenni Reid

10:48, 23 December 2021

Stacks of Turkish lira notes in a bag
The lira moved higher this week after a steep drop – Photo: Mark Songhurst / Alamy Stock Photo

Plunging foreign currency reserves in Turkey indicate central bank interventions to prop up the lira, which surged this week, according to a new report by the Financial Times. 

The lira’s rise followed a deep slump off the back of several interest rate cuts, made despite rising inflation. The Turkish currency fell lower than other emerging market currencies it is often grouped with, including the Brazilian real and South African rand. 

Turkey’s net foreign assets dropped by $5.9bn to negative $5.1bn over the first two days of this week, according to Financial Times analysis of central bank data. 

This, analysts and experts told the newspaper, suggested a “backdoor intervention” which was not officially announced. 


145.00 Price
+0.560% 1D Chg, %
Long position overnight fee 0.0113%
Short position overnight fee -0.0195%
Overnight fee time 22:00 (UTC)
Spread 0.090


1.26 Price
-0.380% 1D Chg, %
Long position overnight fee -0.0046%
Short position overnight fee -0.0036%
Overnight fee time 22:00 (UTC)
Spread 0.00130


0.66 Price
-0.390% 1D Chg, %
Long position overnight fee -0.0072%
Short position overnight fee -0.0011%
Overnight fee time 22:00 (UTC)
Spread 0.00050


0.66 Price
-0.390% 1D Chg, %
Long position overnight fee -0.0072%
Short position overnight fee -0.0011%
Overnight fee time 22:00 (UTC)
Spread 0.00050

Lira movements 

Last Thursday, Turkey cut interest rates from 15% to 14%. The fourth cut in four months was intended to boost Turkish exports and investment but was criticised by many economists. 

After falling to a record low of 18.4 against the dollar on Monday, the lira jumped by as much as 47% late in the day, the highest single day gain since the 1980s. Those gains were pared on Tuesday morning but left the currency at its highest level in a month. 

President Recep Tayyip Erdogan announced several measures to protect the currency that day, saying the government would make up losses incurred by holders of lira deposits if their decline against hard currencies exceed bank interest rates; exporters would be given forward exchange rates directly through the central bank; and the withholding tax rate on lira bonds issued by the government would be cut from 10% to 0%.

Read more: Will the lira’s rollercoaster ride continue?

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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