October 16, 2019 / 8:25 AM / a month ago

Jump in lira FX swap rates jogs memories of big spring squeeze

LONDON, Oct 16 (Reuters) - Turkish one-week lira FX swaps jumped to 20.25% on Wednesday, as a flurry of measures by the country’s authorities to limit market volatility revived memories of a freeze orchestrated on lira trading back in March.

The leap in the swaps rates tested a 2-1/2 month high hit earlier in the week and came after media reports that Turkish authorities had advised some local banks against offering lira liquidity in the offshore London money-market.

The move had echoes of the squeeze put on offshore markets back in March, when a bid to stamp out sharp volatility in the lira, sent the cost of borrowing in the Turkish currency in swaps markets soaring past 1,000 percent.

“It reads like a warning that if the lira sells off again that the liquidity could be squeezed,” said TD Securities emerging market strategist Izidor Flajsman. (Reporting by Marc Jones; editing by Tom Arnold)

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