Problems with settlements between the Russian Federation and Turkey affected the foreign exchange market
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The refusal of Turkish banks to maintain correspondent relations with Russian partners led to a fall in the position of the lira on the market in the Russian Federation. In January, the volume of trading in this currency amounted to 13.9 billion rubles, which is almost four times less than the December result. Due to the large number of holidays, overall activity in the foreign exchange market decreased by only a quarter. The situation continues to deteriorate, and with it liquidity in Turkish currency trading. Market participants hope that the problem will be resolved following the Russian President’s trip to Turkey.
According to Kommersant’s estimates, based on data from the Moscow Exchange, at the end of January, the volume of trading in the Turkish lira in the “tomorrow” trading mode amounted to 13.9 billion rubles. This is almost four times less than the result of the previous month and almost five times higher than the result of January 2023. But a year ago, the lira was not in demand among local investors and ranked only seventh in terms of market share (0.09%).
Interest in the lira began to grow in February 2023 against the backdrop of an earthquake in Turkey, demand for the currency from expatriate Russians and an increase in trade turnover between countries. Already at the end of February 2023, the lira trading volume almost tripled, to 7.8 billion rubles, and with a share of 0.21% it took fifth place among the major currencies, displacing the Belarusian ruble (0.11%) and the Hong Kong dollar (0 .2%). In the following months, activity in the Turkish currency continued to increase along with the growth in trade between the countries, and at the beginning of the second half of the year, trading volume exceeded RUB 50 billion for the first time. per month. In the following months, the indicator remained near the achieved levels.
At the end of the year, the lira trading volume increased more than 17 times, to 465 billion rubles. (0.75% share, fourth place).
At the beginning of the year, trading volumes traditionally fall due to long weekends and seasonally low imports. According to Kommersant’s estimates, in January the total trading volume in the main currency pairs (yuan, dollar, euro, Kazakh tenge, Turkish lira, Hong Kong dollar and Belarusian ruble) in the “tomorrow” delivery mode amounted to 4.9 trillion rubles, which is 22 % lower than the December result, but one and a half times higher than the January 2023 value.
The market-leading decline in activity in the Turkish lira is due not so much to seasonal factors as to geopolitics. After the US Presidential decree on secondary sanctions, Turkish banks severed relations with almost all Russian credit institutions (see “Kommersant” dated January 17). On December 22, Joseph Biden signed a decree granting the US Treasury the authority to punish foreign banks that violate sanctions against Russia.
“After the decree, banks from friendly countries tightened their policies towards Russian clients. Therefore, trade turnover between Russia and Turkey could have decreased at the beginning of this year, and along with it, trading in the lira on the Moscow Exchange,” notes Mikhail Vasiliev, chief analyst at Sovcombank.
Difficulties in settlements with Turkish banks remain. As a result, lira trading volumes continue to decline.
At the end of last week, the volume of trading in Turkish currency amounted to 2.34 billion rubles, which is one and a half times lower than the result of the previous week. At the same time, the volume of trading in the remaining currencies increased by 10%, to 1.33 trillion rubles.
“We note an increase in the volume of incoming applications for payments to Turkey – including even for such “peace-loving” goods as household chemicals or transport services. That is, the number of refusals in direct payments is growing, merchants are looking for working schemes,” says Yulia Shlenskaya, president of the customs and logistics broker KBT. According to VIG Trans group financial director Anna Glazkova, payments are returned by order marked “as per our internal policies”.
In such conditions, market participants do not expect a recovery in lira trading volumes, but hope for an improvement in the situation as new interaction patterns are built. They place great hopes on the possible trip of the Russian President to Turkey, as Kremlin representatives announced at the end of January. Negotiations at the highest level, Mr. Vasiliev believes, “will probably help find an acceptable solution.”
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