Turkish lira volatility makes Forex brokers nervous

On Thursday, the Turkish lira, TRY, fell to a record low against the US dollar, USD, reaching 7.49. The previous minimum at 7.236 was recorded during the currency crisis in the country in August 2018.

The devaluation of the national currency is due to a number of factors, including pressure on emerging markets in general, rising inflation, weak economic growth and a wave of unemployment amid the coronavirus pandemic.

In Turkey, these concerns have been added by investor concern over declining foreign exchange reserves and the need for external financing. According to average forecasts, the lira will continue to fall, while some analysts believe that the Turkish economy will get bogged down in a full-blown recession.

After currency depreciation on Thursday, Forex brokers send out emails and published updates for their clients regarding the situation and how they react to it.

This Friday at least four brokers (Excite One Co., Forex Online, FOREX.com and SBI FX Trade) announced enhanced security measures or issued warnings for clients.

In particular, Excite One announced the closure of positions on USD/TRY, EUR/TRY and TRY/JPY in order to avoid unforeseen circumstances due to a drop in liquidity or lack of price and other risk factors. Some of the websites announced warnings on their sites about the unpredictability of the lira and the risks regarding the Turkish currency.

The FOREX.com website declared that due to the growing tensions in the market environment around Turkey, there was a possibility of an increase in swaps in positions with the Turkish lira. They asked customers to monitor the possible changes in swaps and ensure sufficient margin collateral in their accounts.

Think Markets and OANDA react to the situation

FCA-licensed, Think Markets broker, said that trading on EUR/TRY and USD/TRY currency pairs has been set to “close only” until further notice.

OANDA Japan introduced new restrictions on transactions related to the Turkish lira. Namely, from Friday, a major Forex broker stopped accepting new orders for currency pairs in the lira. Information about the resumption of bidding is not available.