Why is the US dollar TL exchange rate falling?
Why did the dollar fall? Staring Wednesday, December 22, those who follow the economic agenda, especially investors, began to look for the answer to this question. The dollar exchange rate, which broke the historical record by exceeding 18 TL at the beginning of the week, fell very swiftly on Monday night with a last-minute statement made by President Recep Tayyip Erdogan.
The dollar had broken consecutive records after decisions such as reduction in interest rates by the CBRT, the transition of the US Central Bank to a strict monetary policy and the signals of additional interest rate reduction by CBRT in new year. On Monday December 20, the dollar’s value in the free market exceeded 18 TL, setting a historical record.
After the Cabinet meeting, President Erdoğan announced a plan to support the economy and the Turkish LIRA, and after the announcement of the plan, the dollar TL rate almost crashed. As per said plan, the exchange rate difference that may occur to the disadvantage of TL deposit holders, will be paid by the state to the owners of said accounts – thus protecting accounts in TL against possible devaluation of TL. Since that time, the dollar has been going back and forth between 11 and 12 TL. The government’s plan seems to have served the purpose in the short run but economists say the picture may very likely be much different in the long run.
