Turkish banks are self-confessed addicts of the short-dollar position. They borrow dollars, change them into Turkish lira, and buy government bonds that currently yield 108%. Unless the lira plummets against the dollar, and the central bank makes sure that it doesn’t, the banks make a huge margin – so huge that it would be insulting to their shareholders not to play this game.
Once or twice the banks have been caught, for example when the lira devalued 23% in 1994.
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