Turkish commercial lenders pushed up the cost of buying dollars on the interbank market after the central bank asked them to minimize foreign currency sales to companies ahead of Sunday’s presidential election.
(Bloomberg) — Turkish commercial lenders pushed up the cost of buying dollars on the interbank market after the central bank asked them to minimize foreign currency sales to companies ahead of Sunday’s presidential election.
The bank made the request verbally, people familiar with the discussions told Bloomberg. The aim is to keep the lira under control before the May 14 vote, they said, asking not to be named because the requests were made privately.
The central bank declined to comment.
The spread between the interbank exchange rate for liras and the spot rate at the Grand Bazaar widened as much as 7% Thursday morning. The spread was 5.5% as of 1:37 p.m. local time in Istanbul.
Lenders have faced mounting pressure from officials to limit foreign-currency sales amid a surge in demand before the vote. Unable to access foreign currency from banks, many firms have turned instead to the Grand Bazaar, an ancient market in Istanbul that’s home to dozens of exchange rate bureaus and gold traders.
Read more: Turks Skip Banks, Head to Ancient Bazaar to Dump Their Liras (1)
The FX-protected lira savings plan, known locally as the KKM program, was introduced after a currency crisis in late 2021 to boost demand for the local currency with a state-guaranteed return on lira deposits to compensate for any declines against the dollar.
Read more: Erdogan Teeters Before Turkey Vote That’s Got the World Watching
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