Interest Rate Hikes Fail to Curb Flight to Foreign Currency

Despite recent rate hikes, the surge in foreign currency deposits continues, driven by political tensions and economic uncertainty following the March 19 operation targeting Istanbul Mayor and presidential candidate Ekrem İmamoğlu.

The Central Bank of Turkey’s (CBRT) interest rate hike on April 17 hasn’t been enough to stem the rush into foreign currencies. According to data from the Banking Regulation and Supervision Agency (BDDK), foreign currency deposits rose by $4.7 billion between April 16 and April 22, reaching $225.8 billion.

Even with overnight interest rates climbing to 49% and deposit rates surpassing 50% for large sums, investors continue shifting toward foreign currencies.

$21.8 Billion Surge Since March Operation

Since the operation on March 14, foreign currency deposits have jumped by $21.8 billion. The total increase from January 1 to April 22 stands at $37.8 billion.

When adjusted for exchange rate effects, the five-week period between March 14 and April 18 saw a $8.8 billion net increase in foreign currency deposits.

Beyond foreign currencies, demand has also surged for physical gold, precious metal funds (including gold), and foreign exchange investment funds. Since March 19, assets in gold and FX funds have grown by over $4 billion.

Fastest Increase in 6 Years

Excluding exchange rate fluctuations, the rise in foreign currency deposits during the first 16 weeks of 2025 — $16.9 billion — marks the fastest increase in six years. In contrast, there had been a $17.9 billion drop throughout 2024.

As of April 22, 2025, the share of foreign currency in total deposits has climbed to 39.6%, up from 34.9% at the end of 2024.