For the real-valued TRY, the most important tool in the fight against inflation, the economy management has been on the defensive again against the globally rising dollar exchange rate. On the first trading day of the week, there was an outflow of approximately USD 3.5-4 billion from TRY, of which approximately USD 3 billion was foreigners, according to the calculations of market experts. While foreign exchange sales were made by the public against this sharp outflow, Central Bank reserves declined as of the first 15 days of November, and the USD/TRY rose by more than 1 percent. Market experts stated that the economy management set the defense barricade at the level of TRY 34.60 and emphasized that it is likely that there will be a piecemeal exit until the end of the year, but they do not expect a shock.
Following the general elections at the end of May 2023, traditional monetary policy was reverted to and the fight against inflation was accelerated. Tight monetary policy was implemented with rising policy rates, and the real-valued TRY stood out as the most important tool in the fight against inflation. The Central Bank’s support for the TRY to fight inflation and the level of nominal interest rates ensured that both domestic and foreign investors preferred the TRY. After the local elections in March this year, foreigners’ carry trade inflows increased. According to the information provided by market experts, Turkey was among the world’s top carry trade yielders this year. According to the calculations of experts, carry trade inflows after March reached the level of USD 15-20 billion.
The rise in the dollar exceeded 1% in November
Although the TRY maintained its strength in the first days after Trump won the US elections, it could not hold on against the globally strengthening dollar. The USD/TRY rose by more than 1 percent in November, and its rise approached 17.5 percent in the whole of this year. This rise was slow, and the real-value TRY policy was resolutely maintained. However, on the first trading day of this week, the sharpest outflow of recent periods took place. The daily rise in USD/TRY approached 0.2 percent, and since such a rise had not been experienced for a long time, volatility seemed to have increased. According to the information given by market experts, the total outflow on Monday reached USD 3.5-4 billion, of which about USD 3 billion was due to the outflow abroad. Experts believe that most of this outflow is due to foreigners who want to take carry trade profits and that it will continue in the coming days.
Year-end dollar expectation: TRY 35
Banking sector sources emphasized that carry trade outflows will continue until mid-December and that USD 1-2 billion may exit in the coming days. The sources said that this outflow will push the USD/TRY exchange rate level up a little but reminded that this will not cause much trouble and that the average USD/TRY exchange rate expectations for the end of the year are already at the level of 35.
