Commerzbank: Turkey's foreign exchange reserves are clearly insufficient to withstand new sanctions
With the US pushing for more sanctions, including potential caps on Turkey's sovereign debt, many investors fear the market euphoria may be short-lived as Ankara's ability to defend its currency is back in the spotlight.
Data released by the central bank on Thursday showed that net foreign exchange reserves stood at $ 36.77 billion as of October 11. This is clearly not enough to protect the currency if it starts to weaken.
“Turkey's net reserves are not significant,” said Tatha Gose, foreign exchange and emerging markets analyst at Commerzbank in London. “We assume that the central bank of Turkey does not have real reserve resources to deal with the weakening of the lira, should one arise.”
S&P Global Ratings said on Wednesday that Turkey's net foreign exchange reserves are "limited." The agency added that “under a stress scenario, the public and private sectors will be forced to compete for liquidity in foreign currency.”