Currencies from all developing countries depreciated against the USD with increasing demand for the American currency after the commodity index broke a new record in global markets yesterday. TRY, meanwhile, declined against other global currencies. USD/TRY exceeded 16.77 yesterday and TRY has devaluated by over 25% against USD since the beginning of 2022. USD/TRY is traded at 17.08 this morning.
Turkey’s CDS (credit default swap), which shows the cost of the protection of Turkey’s 5-year maturity debt against bankruptcy, rose to 740 points, reaching its highest level since 2008. The public sector has sold USD 1.5bn in foreign exchange (FX) to meet the increasing FX need for two days, according to market experts. They also said USD 1.2bn FX is demanded by legal persons.
According to analysts, domestic developments have also affected the surge in USD/TRY, as the market hoped for a change in economic management and a policy rate hike of 2-3 points. However, recent statements by President Recep Tayyip Erdogan about price stability and the interest rate has disappointed these expectations. Erdogan’s statement about more interest rate cuts, deteriorating inflation forecasts, and the current policy rate of 14% have unbalanced the market. Analysts also think that the new economic model, which aimed for a current account surplus from exports and a production-driven structure, has been hard to achieve due to increasing commodity prices as a result of the Russia-Ukraine war. The year-end current account deficit is estimated to approach USD 40bn for 2022 and all these problems have increased the debate around the Central Bank’s reserves.
In the meantime, Turkey’s benchmark stock index stood at 2,648.19 points at yesterday’s close. Borsa Istanbul’s BIST 100 index earned only 0.07 points from the previous close of 2,648.12 points. The total market value of the BIST 100 was around TRY 2.15tr by market close, with a daily trading volume of TRY 47.9bn.
On the foreign policy side, Russian Foreign Minister Sergey Lavrov, who has arrived in Turkey, will convene today with Foreign Minister Mevlut Cavusoglu to discuss the grain crisis, the Syria issue, and the Russia-Ukraine war. The two parties will hold a joint press conference following the meeting. Lavrov told the Russian press before he visited Turkey that Russia and Turkey would work together to solve the food problem.
The Istanbul Chamber of Industry (ISO) Turkey Manufacturing Export Climate Index dropped from 54.4 to 53.2 in May, compared to the previous month.
The Parliament will discuss the legislative proposal on the law of the Istanbul Finance Center (11.00 a.m.).
Foreign Minister Mevlut Cavusoglu will hold a joint press conference with his Russian counterpart Sergey Lavrov (12.00 p.m.).
The Treasury and Finance Ministry will release domestic borrowing figures for May (5.30 p.m.).
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