Markets now seem calmer thanks to the “a bit” delayed right actions. Especially the Banking Regulation and Supervision Agency of Turkey (BRSA) has taken “out of the box” actions. Here’s what I mean to say:
A communiqué issued last evening has set forth new standards for debt restructuring, thus setting the companies who will require restructuring apart from others while providing relief regarding the potentially problematic loans called Tier 2.
We saw a significant fall in USD/TRY right after this decision that took huge pressure off the banks. As a matter of fact, this communiqué helped eliminate the impact of revaluation losses occurred due to the increasing interest rates on debt securities on the equity. While everyone was wondering whether the exchange rates have fallen because of a new decision about the pastor, I must say that it was in fact the communiqué that helped the exchange rates go down.
BRSA has also put in place regulations on collaterals for leveraged transactions, making more difficult than ever to make Turkish lira transactions.
These actions also involve some decisions that need to be made within the scope of “thinking out of the box notion” Although I expect some negative reactions abroad about these decisions, but we all know what they say, “desperate times, desperate measures”. Surely, such practices will eventually be softened once the circumstances go back to normal.
On the other hand, the US Government stated that President Trump has a great deal of frustration on the fact that Pastor Brunson has not been released. This however did not affect USD/TRY at all, which shows that the Administration’s ability to make its presence known combined with strong support from private sector help Turkey to keep its head high especially in the midst of all sorts of challenges.
“Will the euro replace the US dollar as reserve currency?”
As a matter of fact, the last sign that proved Turkey and EU are mending ties was 2 Greek soldiers’ release from Turkish jail to return to Greece. Germany’s support in all of this does not go unnoticed either. The next step for Turkey may be to focus on the role of Euro as reserve currency and implement regulations accordingly. According to what I have heard, Turkish government is getting such suggestions.
I cannot guess the degree of response to President Erdogan’s call for boycott of US electronics; however, I can guess that the US Government will not hesitate to impose more if this boycott becomes officialised.
Therefore, we should keep track of whether or not tensions between the two countries will escalate before the Eid al-Adha.
