Cheaper Gold Purchases Raise the Exchange Rate

The Central Bank of foreigners after the 4.75 percentage point interest rate hike on November 19 about $ 5 billion in Turkish securities and the stock market since the end of the calculation last week received Istanbul USD / TRY shares fell as 7.53’l level of re-8 lira led the way. Currently around 7.87. But why did the exchange rate skyrocket again despite the extraordinarily successful move by the Central Bank and the normalization steps by the Banking Regulation and Supervision Agency?

THE CENTER RECEIVED 3.3 BILLION DOLLARS

Many people based on what is happening in politics in Turkey last week, the European Union and Turkey are the main reasons for concern for US relations. Some bankers claim that public banks are buyers in the market to replace the foreign exchange assets they have melted in the last year. Experts also point out that the market, which estimates the need to replenish the decreasing reserve due to the fall in Central Bank reserves by 19 percent from 105 billion dollars to 82 billion dollars since the beginning of the year, found it cheap the exchange rate that fell 12 percent after November 19 and made purchases. The figures announced yesterday by the Central Bank show that this view is also correct. Because the Center has increased its foreign exchange reserves from $ 40.3 billion to $ 43.7 billion in the last week. That is, it increased by $ 3.3 billion. Thus, the total reserve of the Center went from 82.3 billion to 85 billion dollars. It is estimated that this policy of the Center to increase reserves continues this week and contributes to the rise in currencies.

CITIZEN ATTACKED BY THOUGHT OF GOLD

Experts also say that BRSA’s delay in regulating the asset ratio and the fact that the revised regulation begins at the beginning of the year also worries the market. However, an important fact that stands out from yesterday’s figures from the Central Bank was that the rise of citizens’ foreign currency accounts continued without slowing down. Ciudadano increased its foreign currency assets by $ 2.2 billion last week (November 13-20) when the Central Bank raised interest rates. This figure can be interpreted as that the citizen still does not believe in the drop in the exchange rate, but there is a detail that actually reveals a different reason for this increase. Because 1 billion dollars of the increase in currency accounts comes from the increase in gold accounts, which we have seen continuously in the last year. The remaining 1 billion lire was due to the increase in dollar and euro accounts. In addition to the drop in the price of gold from more than $ 2,000 to $ 1,807 on international markets, the price of gold per gram decreased 12 percent from 540 lira to 457 lira. After this decrease, when the citizen who found cheap gold was loaded into their gold accounts, the banks bought gold by paying foreign currency to replace this gold. This transaction naturally generated a demand for foreign exchange. It is strongly estimated that citizens’ gold purchases will continue this week and have contributed to the exchange rate reaching 8 levels again.

IMPORT OF 23 BILLION DOLLARS IN 1 YEAR

Looking at the figures, it is seen that the gold accounts of the citizens, which were 9.9 billion dollars at the beginning of the year, increased to 25.6 billion dollars. Along with the gold accounts of participating banks and companies, the increase has reached $ 23 billion since the beginning of the year. The total gold assets of national residents have increased from $ 13 billion to $ 36 billion. This demand from citizens and companies forces Turkey to import gold. Payments Turkey’s 18.5 billion dollars of gold imported by last year’s figures appear to be between 22.9 billion dollars from January to September 2020 looking at the balance of the figures. One of the main reasons for the current account deficit that is installed in imports is becoming a source of foreign exchange, while the departure from Turkey. This plays an important role in the rise in the exchange rate, which alters the balance of the economy, especially inflation.