Market Analysis

Turkish lira pressured over fall in central bank currency reserves

The Turkish lira currency slumped by over five percent against the US Dollar on Thursday, as data showed the nation’s currency reserves falling sharply over the last three weeks. Official data showed the Turkish central bank spent $10 billion this month shoring up the nation’s currency against speculators.

The Turkish lira has been increasingly volatile on the currency market as the Turkish central bank attempts to underpin its currency but raising the Turkish lira swap sale limit to thirty percent from twenty percent in order to stem short-term speculation.

Last week, the Turkish lira dipped by as much as five percent over fears about emerging market economies and the overall health of the global economy. The Turkish lira managed to claw back around two percent in value back earlier this week as global stock markets recovered before the Turkish lira once again succumbed to the latest bearish news about the nation’s dwindling foreign exchange reserves.

Having spent $10 billion in just over three weeks, the latest calculations from economists suggest that the Turkish central bank has around $25 billion left in foreign exchanges reserves. Turkish central bank Governor Murat Cerinkaya sought to play down the fall in foreign exchange, noting that he expects them to recover higher during the last week of March.

Stresses in the Turkish bond market have also been rising this week, with the Turkish ten-year bond-yield rising above eighteen percent, which marked a sharp rise from the start of the month. The nations official interest rate remains at twenty-four percent as the Turkish central bank attempt to combat rising inflation and currency speculation.


USD/TRY Daily Mountain Chart |  Source: ActivTrader


The Turkish lira is like to remain volatile on the foreign exchange markets as the country faces a general election on March 31st, where President Tayyip Erdagon faces a crucial test of popularity. With the Turkish economy coming under pressure, and the main opposition blaming President Erdogan for the stagnant economy, an expected fifty-seven registered voters are set to deliver their verdict on his handling of the current economic crisis.


Written by Nathan Batchelor, External Analyst

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