LONDON: Average daily trading volumes of the Turkish lira fell by 40pc in April from a year earlier, the Bank of England said on Tuesday, after a plunge in the price of the lira and a clampdown on speculating in the offshore market scared away investors.
The BoE said in its semi-annual survey of the London foreign exchange market, the world’s biggest, that average daily trading volumes of the lira against the US dollar fell to $33.5 billion in April from $35.2 billion in October 2018, and $56.2 billion from April last year.
That translated to a fall in market share of overall forex trading volumes to 1.2pc from 2.1pc last year.
Most of the collapse in lira trading activity followed the slump in the currency’s value in August last year when investors panicked about the central bank’s independence and ability to tackle rising inflation and an economic downturn.
Trading volumes have fallen further since Turkish authorities allegedly pressured local banks in March to stop lending lira to overseas counterparts in a bid to squeeze the London lira market, causing a spike in offshore borrowing costs of more than 1,000pc.
Ankara has blamed foreign “speculators” for the lira’s weakness.
Some foreign banks have pulled back from the Turkish lira offshore market because of the volatility and risks involved, several sources familiar with the London market have said.