Reuters analysis: Turkey’s Central Bank is having a hard time holding dollar TL rate

Despite the horizontal course of the Turkish Lira after the earthquake, the $ 7 billion decrease in the reserves of the Central Bank (MB) in the last two weeks shows that the ‘stable exchange rate policy’ is being forced.

The dollar/TL exchange rate has been moving on a horizontal course with the suppression of the government for some time. This situation has not changed after the earthquake either. However, the government had to take additional measures.

Bankers who spoke to Reuters agree that the pressure on foreign exchange policy will continue in the short term with the earthquake. But in the long run, international assistance will play a key role.

The fact that one of the biggest redemptions of the year in exchange rate protected deposits coincided with the earthquake was also one of the factors that made it difficult to balance the currency. 12 Billion KKM was redeemed simultaneously with the earthquake.

The manager of the foreign exchange desk of a bank said: “The Central Bank has been creating a balance for a long time by directing the new foreign exchange revenues it provides, especially exports, to the market. When there was a shift in the balance in one direction, it brought an arrangement to this issue and provided a balance again. This is not the first time the Central Bank has used its reserves during this period… But this cannot be continued for a long time because the reserve amount is low. Therefore, I expect the continuation of steps in the direction of reducing foreign exchange demand.”

The Central Bank’s weekly reserve losses are not surprising for the current policy, which bankers describe as publicly controlled. But in this policy, since the demand for foreign currency is financed through channels that provide constant foreign exchange income, such as exports, it is also impossible to ‘constantly lose reserves’.