Lira awakened the feelings of investors

Last week, the activity of investors in the Turkish lira on the Moscow Exchange reached a five-month high. Over the past five days, the volume of trading in this currency amounted to 2.4 billion rubles, which is 60% higher than the previous week. The activity of market participants increased against the background of the earthquake in Turkey and the demand for foreign currency from the departed Russians.

According to Kommersant’s estimate, based on data from the Moscow Exchange, over the past week the total trading volume of the Turkish lira with delivery “tomorrow” exceeded 2.4 billion rubles. This is 60% more than the result of the previous week and the second result in four years of trading this currency on the Russian market. The trading volume was higher for the working week ending September 16, 2022, when the indicator reached 3.5 billion rubles.

The increase in activity occurred against the backdrop of a decrease in the total volume of trading with major currencies (dollar, euro, yuan, Turkish lira, Hong Kong dollar, Kazakh tenge, Belarusian ruble). At the end of the week, the volume of trading in these currencies with delivery “tomorrow” amounted to 856 billion rubles, 3% lower than a week earlier. As a result, the Turkish lira entered the top 5 currencies in terms of trading volume, displacing the Hong Kong dollar from the fifth line. In fourth place with an indicator of about 3.9 billion rubles. placed the Kazakh tenge.

The Turkish lira does not represent “any special speculative interest,” Valery Yemelyanov, an expert on the stock market at BCS World of Investments, believes.

A short-term driver of demand growth, in his opinion, could be an earthquake in Turkey and a possible increase in transfers to the country. Mikhail Vasilyev, chief analyst at Sovcombank, admits that transfers in Turkish lira could grow against the backdrop of the tragedy for humanitarian purposes. “Another factor in the increase in turnover in lira is the relocation of some Russians to Turkey due to geopolitics,” he clarifies.

The growth in trading volumes is also facilitated by the increase in trade between Russia and Turkey. According to Andrey Buravov, Consul General of the Russian Federation in Istanbul, by the end of 2022, trade turnover between the countries doubled to $70 billion.

Given this and the plan to switch bilateral trade to rubles and lira, the volume of trading in Turkish lira on the Moscow Exchange could be higher, analysts say. For example, against the backdrop of an increase in trade between Russia and China by almost 30%, to $190.271 billion (data from the Customs Administration of the PRC), the volume of trade in the yuan grew several dozen times over the year and, with the execution of “tomorrow”, began to exceed the US dollar.

In the trade turnover between the Russian Federation and Turkey, national currencies “probably do not dominate yet,” Oleg Syrovatkin, a leading analyst at the Otkritie Investments department for global research, believes:

“There is no stable demand for the lira in Russia, and some market participants buy relatively large volumes of this currency very occasionally, as needed.”

The high volatility of this currency is holding back the transition of Russian companies to lira. Over the past five years, its exchange rate against the US dollar has fallen five times, the lira has lost 25-80% in value every year. “From the point of view of capital preservation, the Turkish lira also does not look attractive: inflation in the country remains very high. In addition, the lira exchange rate looks artificially high,” notes Mr. Syrovatkin.

Despite the constraining growth factors, the activity of investors in the lira will continue to grow, analysts say. This is facilitated by the possible creation of a gas hub in Turkey and a real transition in its settlements from the Russian Federation to national currencies. “The speed of the transition to national currencies will also depend on Turkey’s readiness to actively trade with Russia, despite US pressure and the risks of secondary sanctions,” Mikhail Vasiliev believes.

The Kazakh tenge and the Belarusian ruble also have a high potential for growth, which are consistently among the top 20 trading partners of Russia. Of the less close and “not unfriendly,” Valery Yemelyanov clarifies, “there are only India and Brazil, but their currencies are not traded in Russia.”

Vitaly Gaidaev