Turkish lira faced an attack by currency manipulators and here's how the country countered them
Turkey's currency faced a series of attacks from London-based financial institutions that engaged in the rapid buying of foreign currencies with Turkish lira, prompting the country's banking regulator to put a percentage cap on the currency swap.
In Turkey's case, what financial institutions in London did was buy Turkish lira on credit and use that money to buy US dollars. Then they purchased other currencies with the dollars that were essentially brought with Turkish lira. In this cycle, the lira begins losing its value in the market., Dr Mevlut Tatliyer from Istanbul Medipol University’s economics and finance department, said such a manipulation is not new to Turkey.
While the game of currency manipulation was going on against Turkey in London, the country was bracing for local elections. But several London-based institutions had already purchased large amounts of US dollars using on-credit liras. Once the elections were over, they could not find Turkish lira because Turkey's financial regulator, the NRSA, had already taken measures against the exchanges that had led to the depreciation of the lira.
“In the time of coronavirus, there is an incredible capital outflow from developing countries to America,” he said, adding that that factor is one of the main reasons why many currencies are weakening. Tatliyer said central banks worldwide have no power to intervene in salvaging economies, in the long run, no matter how full their foreign currency reserves are.
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