USD/TRY, which exceeded 15.00 on Friday, has started this week with an increase. USD/TRY surpassed 15.27 while EUR/TRY exceeded the 16.00 limit again. Apart from USD appreciation abroad, high inflation, an increasing current account deficit and a rising negative rate of return support the surge in foreign exchange (FX) rates, according to daily DUNYA. The Central Bank and the public banks were sellers and foreign investors, and companies were buyers at the FX market yesterday. In the meantime, the Central Bank and the Banking Regulation and Supervision Agency (BDDK) required banks to carry out FX transactions between 10.00 a.m. and 4.00 p.m. when the market is liquid.
Turkey’s 5-year CDS exceeded 700 points yesterday while USD/TRY rose by 4% within a week. But why is it surging after 4 1/2 months?
Turkey started to ease the monetary policy in September 2021 and cut the policy rate to 14%. Then, the deterioration in inflation outlook and forecasts accelerated and the inflation hit 69.97% in April. The real negative interest rate, which reached 30 points, has almost halted the interest of foreign investors in the country. Despite the increasing FX need, inflow from this channel has declined to a minute amount.
The net international reserves of the Central Bank amount to USD 17.01bn excluding swap transactions. Although no official statement has been made, market experts say the Central Bank and public banks frequently make sales in the FX market. The current amount is considered among the reasons for the USD/TRY surge.
The public sector’s FX needs and that of companies have risen due to increasing energy prices. Increasing costs, deteriorating current account balance and rising raw material prices for companies pave the way for a surge in demand for FX.
Implementations brought by the economic management for FX transactions highlight the FX needs of both citizens and companies. Experts say limits raise the demand further by deteriorating expectations due to concerns over tighter steps.
DAILY AGENDA
>> The Turkish Statistical Institute (TurkStat) will release Construction Cost Index for March (10.00 a.m.).
>> The Central Bank will release weekly money and banking statistics (2.00 p.m.).
>> The Treasury and Finance Ministry will release Treasury cash realizations for April (5.30 p.m.).
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