Clearstream, Euroclear Halt Lira Trade on ‘Bridge’ Platform
Clearstream, Euroclear Halt Lira Trade on ‘Bridge’ Platform
(Bloomberg) -- Clearstream Banking and Euroclear Bank have jointly decided to suspend Turkish lira transactions over a shared electronic communications platform effective from May 18, according to a statement on Clearstream’s website.
The decision to temporarily suspend lira transactions on the platform known as the Bridge was made due to liquidity restrictions on the lira related to Covid-19, Clearstream said in the statement, adding that new settlement instructions in lira will be refused as of Friday evening.
“Due to liquidity restrictions on the Turkish lira related to Covid-19, transactions in lira over the Bridge can no longer be settled under satisfactory conditions,” Clearstream said. “Clearstream Banking, together with Euroclear Bank, has therefore taken the joint decision to temporarily suspend this service.”
Clearstream, however, said domestic settlement via the Clearstream Banking link to Turkey and internal settlement in lira continue to operate as usual. It recommended that customers keep a buffer amount in their cash accounts in lira. They should also monitor their securities settlement, trading in Borsa Istanbul and cash transfer activity to avoid the possible risk of failed transactions because overdraft credit lines have been removed.
The decision, “although perhaps inadvertent, does seem to do the work of Turkish officials, making it more difficult for foreign parties to transact in lira,” said Marc Chandler, managing director at Bannockburn Global Forex. Given the lira’s appreciation over the past week, “a short-squeeze had already begun and this action could see it extended,” he said.
The Turkish lira has been gaining since hitting an all-time low of 7.2690 on May 7. It closed trading at 6.9013 per dollar on Friday.
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