Turkey continues violating Greek airspace despite the lira tumbling

Turkish lira

1 4

Turkey made 33 violations against Greece's airspace on Wednesday despite the Turkish lira tumbling against the U.S. Dollar and Euro.

A total of 8 Turkish jets violated Greek airspace 33 times, but all were intercepted by the Greek air force and chased out.

What makes this more unusual is that the Turkish lira is taking a battering on international markets, once again reaching over 7 liras to the U.S. dollar and 8 liras to the Euro.

The Central Bank of Turkey's foreign exchange reserves have fallen to $49.2 billion since July 17.

Panic gripped international banks on Tuesday when the Turkish lira's daily exchange rate (swap) for foreign trade jumped.

International financial institutions have tried to get rid of the Turkish currency, as the cost of borrowing in Turkish lira has skyrocketed. However, many of them failed to close the positions in the Turkish currency, as a result of the policy pursued by Turkish President Recep Tayyip Erdoğan as it undermines the liquidity of the lira in international markets, according to sources who spoke to Bloomberg.

International banks were unable to trade due to restrictions imposed by the Turkish government, forcing them to keep the lira at the overnight rate at 1.050%, the highest level since March.

Banks proceeded with massive sell-offs of the lira, with the Turkish currency recording losses of more than 2.2% against the dollar and the exchange rate exceeding the psychological level of 7.

Restrictions by the Turkish authorities are a tactic they have followed in the past, creating a technical liquidity crisis of the lira in order to prevent erratic devaluation of the currency.

The technical crisis has left foreign banks unable to trade, with authorities temporarily barring Turkish banks from trading with Citigroup, UBS and BNP Paribas.

The latest move by the Turkish authorities follows their strong intervention in the foreign exchange market last week. Dollar sales by state-owned banks to support the lira began after a public holiday, restricting the supply of currency, which pushed the day-to-day lending rate offshore to its highest level in 17 months.

The Central Bank of Turkey's foreign exchange reserves have fallen by more than a third since July 17 to $49.2 billion, including gold, to $89.5 billion. Of that, more than $54 billion has been borrowed from domestic banks through short-term exchanges, according to the latest available data by the end of June.

Despite this crisis though, Turkey still manages to waste money to violate Greek airspace on a near daily basis.