[The depreciation of emerging market, or EM, currencies against the U.S. dollar continued throughout last week: As I write this column, the greenback was trading at around 1.852 Turkish Liras, as opposed to last week’s 1.83. The euro was at around 2.527 liras – the Turkish currency is probably among a handful of currencies that is depreciating against the bruised euro.

The days of debating whether one lira would equal one dollar have evaporated too fast. Nowadays the debate is about a 2:1 ratio, which might come true if the capital flight from “risk assets” continues.

Of course, that flight itself is mainly triggered by expectations of a debt default in Greece and the bleak U.S. economic picture. Pretty “market-friendly” developments occurred yesterday, such as the Bundestag’s support to strengthen the European Financial Stability Facility, the EU bailout fund, or positive economic data coming from the U.S. These will undoubtedly leave a positive mark on investor sentiment, but it is hard to say they are indicators of a sustained economic recovery.

So, let’s leave market sentiment aside for a while, and look at “Central Bank sentiment.” Since the start of August, the Turkish Central Bank has sold more than $2.8 billion to support the lira. Only yesterday, $70 million was sold, facing a demand of $195 million. This alone shows that short-term foreign capital remains in “exit mode.” Still, the low level of demand is too low to call this a full-fledged capital exit from Turkey. Remember the $4.9 billion that fled in two hours on Feb. 19, 2001, for example, or the $1.5 billion exit on Nov. 22, 2000? In contrast, this latest round’s record remains at $350 million, sold on Sept. 20.

Past experience shows that daily foreign exchange auctions could “unnerve” currency markets. Of course, when those markets represent a daily turnover of $4 trillion (in 2010 figures), it is a given that past bets against those markets have all ended in tears. If we don’t want to remember those dark years in Turkey, I suggest Thailand 1997, or Britain 1992.

But this time, the Turkish Central Bank is not alone in its auctions. Since early September, Russia’s central bank sold $6 billion to defend the ruble. In Poland, where the zloty has weakened by 10 percent since Jan. 1, the central bank intervened on Sept. 23. Analysts expect the Ministry of Finance to sell up to 14 billion euros this year. Similar auctions to sell dollars have taken place in countries like South Korea, Indonesia, Croatia and India, with auctions expected in Hungary and Taiwan. Japan’s Finance Minister Jun Azumi, by saying that the yen’s appreciation especially since August has “thrown cold water on economic recovery,” has signaled the mother of all interventions. We should not forget the “permanent intervention” put in place by the Swiss central bank, which set an exchange rate cap at 1.2 franc to the euro.

So, what’s going on in Turkey is definitely part of a larger EM trend. Have the EMs lost their mojo, then? A detailed study from RBC Capital Markets claims that the EM benefit from the global liquidity surge is “past its peak,” adding that such peaks usually “precede sovereign debt crises.”

Simon Derrick of BNY Mellon, meanwhile, reminded us of the cloudy days of the 1973 bear market, which was aggravated with the Yom Kippur War and the ensuing oil embargo.

History never repeats itself, but as Mark Twain said, it “rhymes,” and the current rhyme we see, with all this turmoil regarding Israel, Cyprus, Greece, Syria, Egypt and Libya, does not bode well.

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In a July column, I’d humbly joined the global chorus requesting transparency from NYSE Liffe, the derivatives arm of NYSE Euronext. The company has responded to the calls, announcing on Wednesday that starting from Oct. 3, it will publish weekly “Commitments of Traders” reports for commodities futures contracts listed on its London market. Such a report will undoubtedly help analysts, investors and journalists alike to understand the trends in a vital market. So, congratulations, NYSE Liffe!]

Another timely piece from Taylan. I have looked at a similar EM issue at this week’s Hurriyet Daily News column, which I have yet to post at the blog. As for Central bank of Turkey’s “interventions”, a picture is worth more than 1000 words:

But since there are only two axes in a graph, I will have to put in 2000 words of pictures:

As you can see, the reserves are eroding fast. That’s why the Fund was basically recommending against fight currency markets this way in its latest report on the Turkish economy…

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