Jefferies International strategist Durukal Gun said in a Monday note that the United States could extend a dollar swap line to Turkey before the country’s elections, a step that would, in his view, strengthen Turkey’s hard-currency reserves and lift market confidence.
Gun described a U.S. backstop - similar in structure to the package provided to Argentina last year - as a measure that could alleviate immediate pressure on Turkish policymakers confronting a weakening lira. According to the strategist, such support would help contain inflation expectations and work against the trend of dollarization among savers and investors.
The strategist also said the move could ease strains in credit markets by lowering Turkish credit default swap - or CDS - spreads, which have risen in recent months as investors have priced in greater financial risk for Turkey.
Gun noted there is a plausible scenario in which Turkey receives a foreign exchange swap line from the United States ahead of elections, drawing a direct parallel to the arrangement implemented for Argentina. He added, however, that Turkish and U.S. officials have not publicly discussed the possibility of a swap line between the two countries.
Turkey’s national vote is set for mid-2028, though the note acknowledged that analysts and some lawmakers have raised the possibility that President Recep Tayyip Erdogan might call an early snap election to pursue a third term.
Jefferies’ reference to the U.S. support package for Argentina recalled that the Treasury put in place a $20 billion currency-swap framework with Argentina’s central bank and also made direct U.S. purchases of pesos. Those measures were designed to stabilize markets and prevent a run on the peso ahead of that country’s midterm elections.
Context and implications
Gun framed a U.S. dollar swap line as a potential stabilizing tool for Turkey’s external balances and market sentiment, but noted that any such outcome would depend on bilateral discussions that have not been made public. The strategist tied the possible intervention to a desire to limit currency-driven inflationary pressures and to discourage conversion of lira holdings into dollars.
The note also linked a swap arrangement to potential improvements in credit market perceptions, as signaled by CDS spreads.