The recent imposition of the FX settlement delay by the Banking Regulation and Supervision Agency did not benefit the lira immediately as it fell slightly against the US dollar. However, this move could scare away investors who might interpret it as a move towards stricter capital controls in the country.
As much as the Turkish government wants to boost the lira, which has fallen over 35% against the US dollar since last year, they should be careful not to derail the country’s economy. President Tayyip Erdogan’s government has been accused of stifling dissenting voices under the guise of securing the country from another coup attempt, but this has raised concerns in the west.
Turkey’s economy remains shaky as the current administration openly concentrates power among President Erdogan closest associates and family members. The FX settlement delays may result in a much weaker lira over the long-term as direct inflows of foreign capital decline as investors shy away from the country.