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    Turkish CB re-launches fx depot market for banks, lira rises vs dollar

    HotNewsTurkey with wires
    09.10.2008 - 09:56 | Son Güncelleme:

    Turkey's central bank said on Thursday it re-launched its foreign exchange depot market for banks to borrow from each other through the central bank. The lira rose around 3 percent against the dollar after the announcement. (UPDATED)

    The bank said the minimum volume of transaction will be $1 million or 1 million euros with due dates between one week and one month. The foreign exchange depot market would be effective as of Thursday.

    The forex depot market, in which the Turkish Central Bank was the financial intermediary and regulator, was closed in December 2002.  

    In order to maintain confidence in the system and sustain foreign currency liquidity in the market the bank decided on reactivating the market, the statement said.

     

    The central bank said the ongoing global financial crisis created concerns over the reliability of the global financial system and created a liquidity crunch in major economies.

     

    "This environment of uncertainty can cause tighter foreign exchange liquidity flows and the central bank decided to re-activate its intermediary activities in the forex depot market starting from today to continue until uncertainties in international markets disappear," the central bank said in a statement.

     

    Some bankers had called for the central bank to reactivate the depot market, pointing at the global crisis and potential foreign exchange liquidity problems for the banks.  

     

    According to the statement, all member banks will participate to the system, but all of them have their own limits defined by the central bank.

     

    Analysts say this is an important step to regulate and maintain flow in the foreign exchange market, but it should be highlighted that the reactivation of this market does not mean that the bank will provide foreign exchange liquidity to the market.

     

    The lira, supported with the central bank's statement, gained almost 3 percent against the dollar and traded at 1.38 levels. The U.S. dollar opened over 1.40 YTL levels in the early morning trade. The lira had lost more than 10 percent against the dollar as the global credit crunch continued to hit markets.

     

     

     

     

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