The TRY devaluation continued for the ninth successive day today. USD/TRY surpassed 15.85 while the surge in EUR/TRY exceeded 2% and tested above 16.60 yesterday when the USD index globally dropped. Thus, TRY and RUB were the only currencies that depreciated against the USD. USD/TRY is traded at 15.86 and EUR/TRY is at 16.70 this morning.
TRY has depreciated by 7% against the USD in the last two weeks when concerns over interest rate hike-driven recession and sales pressure increased in global markets. USD/TRY, which was traded at 14.77 on May 4, rose by 1.00 in nine trading days.
Analysts have started to question the sustainability of the foreign exchange (FX) rate policy, while USD/TRY saw above 15.65 for the first time since December 20 of last year, when the FX-Protected TRY deposit account was announced after a sharp FX rate hike. They also do not expect such a sharp surge now but the current state of the Central Bank’s reserves creates concerns over the power of the bank to intervene in the FX market at some point. They say the USD/TRY movement around 16.00 will follow.
On the other hand, the market is expecting the inflation-indexed bond product, which is frequently mentioned by the Treasury and Finance Minister Nureddin Nebati. The product, which is also called a super bond, is estimated to become an alternative for investors against inflation and therefore the demand may shift from USD to this product.
Nebati stated at the 21st Ordinary General Assembly of the Participation Banks Association of Turkey (TKBB) that they do not consider inflation and the fight against inflation a one-dimensional problem to be solved by the government alone but as a multi-dimensional issue to be resolved in coordination with all stakeholders. Stressing that they are aware of the importance of financial stability to achieve macroeconomic goals, Nebati added: “We’ve stabilized the fluctuation in FX rates, an important determinant of inflation, to a large extent with the FX-protected TRY deposit and participation accounts and supportive alternative instruments. Now, our goal is to improve estimations, one of the main reasons for inflation. We’ll overcome the inertia and estimations of inflation by taking steps together.”
Finland and Sweden voiced optimism that common ground can be found with Turkey over its objections to them joining NATO amid a flurry of diplomatic activity aimed at smoothing their path into the 30-nation alliance, according to Reuters. “Statements from Turkey have very quickly changed and become harder during the last few days,” Finnish President Sauli Niinisto said during an address to Sweden’s parliament. “But I am sure that, with the help of constructive discussions, we will solve the situation.”
Foreign Minister Mevlut Cavusoglu and his U.S. counterpart Antony Blinken will convene in New York today for the first meeting of the Turkey-U.S. Strategic Mechanism at the foreign ministers’ level. Cavusoglu and Blinken are expected to discuss all aspects of Turkish-American relations as part of the strategic mechanism.
The Parliament will continue to discuss the legislative proposal on the amendment of the Decree-Law No. 655 on the Organization and Duties of the Ministry of Transport, Maritime and Communications, the Banking Law and the amendment of some laws.
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Experts interpret the reasons for the recent FX rate hike.