Swissquote, an online trading services provider, has mandated its customers to close all their Turkish lira positions by May 5th, as per the report by Bloomberg on May 2nd. Taking this necessary precaution helps to reduce the potential risks associated with market fluctuations.
The company has issued a statement indicating its intention to assume responsibility for the closure of all open lira positions if certain customers fail to do so by the prescribed deadline. Furthermore, effective from May 15th, the company will no longer offer any lira parties.
Turkey’s upcoming presidential and parliamentary elections on May 14th, are expected to be fiercely contested.
In the lead-up to the crucial polls, there has been a significant surge in the one-month implied volatility of the Turkish lira. It is highly likely that the lira will experience remarkable fluctuations in either direction depending on the outcome of the elections or any other campaign events.
The political uncertainty levels in Turkey have reached chaotic proportions, surpassing even the country’s usual standards.
Despite facing health issues, Turkey’s leader Recep Tayyip Erdogan is persevering through the electoral process as planned. He has the option to postpone the elections if he deems it necessary.
Based on an analysis conducted by BNE IntelliNews, it is predicted that the upcoming first round of the presidential election may result in Erdogan receiving less than 30% of the vote. Conversely, it is projected that his main competitor, Kemal Kilicdaroglu, will receive over 60% of the vote, leading to a clear victory and eliminating the need for a second-round head-to-head contest between the top two candidates.
It must be made clear that Erdogan does not possess the necessary power to resort to extreme measures, such as declaring another election victory that cannot be verified. It is imperative to note that Turkey would need to undergo significant and unsettling events for this option to even be considered.
As a final option, Erdogan could potentially benefit Turkey by seeking medical treatment overseas. This could serve as a favorable solution for him, enabling him to maintain his reputation. He could assert that if not for his pressing health concerns that required treatment, he would have undoubtedly emerged victorious in the elections.
Recently, the USD/TRY has been breaking records once again. On April 27, the interbank market witnessed a new high for the struggling lira, reaching TRY 19.72.
Since the start of March, the pair has consistently broken through the 18.80s barrier and is currently trading mainly in the 19.40s with occasional spikes.
It is imperative to make reference to the “interbank market” at present as market rates are fluctuating around 21, with buying and selling offers exhibiting one to two lira spreads. According to Hakan Guldag, the editor-in-chief of the local business daily Ekonomi, there are widespread complaints about the current scarcity of hard currency in Turkey, coming from both citizens and businessmen.
Despite the recent increase in lira supply and the consequent outflow of hard currency resulting from record trade deficits, officials are taking proactive measures to prevent a dramatic decline in the value of the lira. They are urging bankers to restrict domestic foreign exchange demand, while also benefitting from unidentified inflows and support from “friendly countries.”
Another lira crisis is highly likely and could happen at any given time.
The global markets are currently displaying remarkable stability without any signs of turbulence. Turkey’s credit default swaps (CDS) for the five years; continue to remain below the 600-level mark, while the yield of the Turkish government’s 10-year Eurobonds is holding steady around the 9% level.
USD/TRY Long (Buy)
Enter At: 19.585406
T.P_1: 20.944721
T.P_2: 22.747518
T.P_3: 24.837498
S.L: 16.400573
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