Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Turkey strikes currency swap deal with UAE as ties warm

Published 01/19/2022, 04:50 AM
Updated 01/19/2022, 05:55 AM
© Reuters. FILE PHOTO: A logo of Turkey's Central Bank (TCMB) is pictured at the entrance of the bank's headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas

© Reuters. FILE PHOTO: A logo of Turkey's Central Bank (TCMB) is pictured at the entrance of the bank's headquarters in Ankara, Turkey April 19, 2015. REUTERS/Umit Bektas

By Daren Butler

ISTANBUL (Reuters) -Turkey and the United Arab Emirates said on Wednesday they had agreed a nearly $5-billion swap deal in local currencies, in a sign of warming diplomatic relations that provides Ankara financial support as it faces economic turmoil.

The agreement between the countries' central banks comes after the regional rivals sought in recent months to repair relations that were badly strained in the wake of the 2011 Arab Spring uprisings.

Turkey could tap the foreign currency to bolster its reserves, which on a net basis are at a two-decade low, after the central bank began costly market interventions last month to prop up the tumbling lira.

The lira, which lost 44% to the dollar last year, was 0.5% weaker at 13.6 at 1039 GMT. Some economists were skeptical the swap deal would bring reprieve.

"We do not see the swap agreement as a meaningfully positive development as it only boosts the headline gross reserve series but does not add to the (central bank) hard currency reserves," Goldman Sachs (NYSE:GS) said in a note.

The two central banks said in a statement the accord was for three years with the possibility of extension. Its nominal size is 64 billion lira ($4.71 billion)and 18 billion dirham.

"This agreement demonstrates the two central banks' commitment to deepen bilateral trade in local currencies in order to advance economic and financial relations between our countries," said Turkish Central Bank Governor Sahap Kavcioglu.

Last month Reuters reported, citing officials, that the Turkish central bank was wrapping up talks with its UAE and Azeri counterparts with at least one deal likely soon.

The accord follows a visit by Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan to Turkey in November, when preliminary talks on a swap deal took place.

Turkey has swap deals with China, Qatar and South Korea worth about $23 billion.

Turkey's foreign reserves have been thin since a series of currency market interventions in 2019-2020 in which some $128 billion was sold via state banks, backed by the central bank. Ankara at the time sought swap deals with the United States, Britain, Russia and Malaysia, Reuters reported.

© Reuters. FILE PHOTO: Turkish Central Bank Governor Sahap Kavcioglu speaks to the media in Ankara, Turkey October 15, 2021. REUTERS/Cagla Gurdogan

The central bank's net international reserves fell below $8 billion on Jan. 7 to their lowest level since 2002.

($1 = 13.5951 liras)

Latest comments

Good 👍 for both countries
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.