1 year ago
Turkey Central Bank Seeks to Curb Lira Currency Bets
Turkey's central bank is trying to make it harder for people to quickly bet on the Turkish currency, the lira.
This is because they are worried about investors making quick profits and then suddenly pulling their money out, which could cause problems.
The central bank has kept interest rates high to attract investors.
These investors borrow money in countries with low interest rates and invest it in Turkey.
However, if many investors pull their money out quickly, it can hurt the economy.
Despite these concerns, it remains profitable to bet on the lira.
Major banks have advised clients to continue doing so.
Turkish Central Bank is attempting to deter 'hot money' flows into the lira.
The central bank is concerned about volatility from rapid unwinding of short-term carry trades.
Carry-trade returns for the lira in May were the biggest since 2021.
Inflows from carry trades totaled about $3.4 billion since April 18.
Major financial institutions are recommending lira-denominated carry trades.
- Who
- The Turkish Central Bank and carry traders
- What
- Turkey's central bank is taking steps to deter short-term carry trade bets on the lira.
- Where
- Turkey
- When
- The actions are ongoing, with recent market moves making the lira's value less predictable.
- Why
- To reduce volatility caused by rapid inflows and outflows of short-term capital.
Central Bank View
Carry Traders View
Volatility vs. Profitability
Central Bank View
Concerned about volatility from rapid outflows of short-term trades.
Carry Traders View
Carry trades are lucrative.
Key facts
- Central Bank Interest Rates
- Near 50%
- March Selloff
- Currency plunged 10% in hours
- Carry Trade Inflows (April 18 to current)
- $3.4 billion
- Carry-trade returns (May)
- Biggest since 2021
- Winning Streak
- 5 Quarters

