Economy in Turkey: Dollar surpasses 27 Turkish Lira once again

The USD/TRY exchange rate, after about a month of hiatus, rose above 27 again today, while central bank decisions will be in the spotlight throughout the week. The USD/TRY continued its modest rise, surpassing the 27 level, with central banks, including the Turkish Central Bank (TCMB), as well as the U.S., the U.K., and Japan expected to announce interest rate decisions this week.

After the TCMB’s 750 basis point interest rate hike on August 24, the USD/TRY had dropped below the 27 level. Today, after a 25-day break, the exchange rate once again exceeded the 27 level.

The Treasury will re-issue seven-year floating rate and 10-year benchmark bonds today. The Treasury, after conducting three auctions last week, borrowed approximately 50 billion Turkish Lira, and they are planning to borrow 110 billion Turkish Lira in domestic markets in September. The domestic borrowing program for September will be completed with two borrowings tomorrow.

TL DEPRECIATES BY 23 PERCENT SINCE JUNE

Following the sharp rises in June and July after the elections, the USD/TRY has been following a slightly upward flat trend. Since June, when control over the exchange rate was relaxed, the Turkish Lira has depreciated by about 23%. The exchange rate started the day at around 27.0150 this morning.

President Recep Tayyip Erdoğan is currently in New York City, USA, to attend the United Nations General Assembly. Meetings with international investors, along with the economic management, will also be closely monitored this week.

EYES ON INTEREST RATE DECISIONS

This week, major central banks, including the U.S. Federal Reserve (Fed), as well as many central banks from emerging economies, will hold monetary policy meetings.

Markets are pricing in that the Fed will keep its policy interest rate unchanged and will focus on the updated forecasts for the economy and interest rates, as well as the statements of Fed Chairman Jerome Powell.

Following President Erdoğan’s support for a tight monetary policy, it is expected that the Central Bank (TCMB) will continue its gradual interest rate hikes, raising the one-week repo rate to 30% with a 500-point increase.

All 16 economists participating in the Reuters survey expect an increase in the policy rate, with forecasts ranging from 27.5% to 31%.

With the new economic management established after President Erdoğan retained power in the elections, previous policies are slowly being abandoned, and a strategy that is expected to be accepted by international investors is being implemented.”