Just days after we exposed the possibility that Turkey is misrepresenting its dollar reserves (using swaps to inflate its levels), Bloomberg reports that the Erdogan administration has imposed soft capital controls on large retail dollar purchases to stem outflows.

The lira has been rallying all day amid chatter of heavy bank-buying (at the suggestion of authorities to support debt auctions), but as headlines hit about the capital controls, the lira began to slide.

Bloomberg reported that, in the latest sign of their increasingly interventionist approach to policy-making, Turkish authorities asked some of the nation’s primary dealers to support the government’s borrowing drive last week, according to three people with direct knowledge of the matter.

And now banks should settle all retail transactions valued at $100,000 or higher one working day later, according to a document the banking regulator sent to lenders on Monday, which was seen by Bloomberg and verified by three bankers.

This is a major red flag suggesting that Turkey (and/or its banks) are running dry of dollars to stem the capital flight.

Which is a big problem as we noted previously:

“The bottom line is that they don’t have enough, whether it’s net or gross,” said Tim Ash, an emerging markets strategist at BlueBay Asset Management. "Everyone in the market knows that Turkey doesn’t have enough foreign currency reserves to mount a sustained and credible defence of the lira."

The only question is when will the price of the lira, which at the current level of around 6.00 vs the dollar is wildly overvalued, start reflecting Turkey's dismal situation.