Interest increased, foreign hot money arrived: $ 15 billion in 6 weeks

While the USD / TL exchange rate fell below 7.50 today, the inflows of foreign hot money in the last 6 weeks when the management of the economy changed and interest rates rose attracts attention.

Foreigners, who made strong departures in the January-November period, made a large number of entries in the November 6-December 18 period.

The inflows and outflows of foreign hot money in the short term cause strong fluctuations in the currency and indirectly in the economy in general.

The Central Bank (CBRT), which cut the below-inflation policy rate by 8.25 percent in May, raised it to 17 percent to curb the rate with inflation and attract foreign hot money.

PURCHASES OF SHARES AND BONDS ARE CLOSE TO $ 4 BILLION

According to data from the Central Bank (CBRT), foreigners bought net shares for $ 1,497 million, bonds (public debt securities) $ 2,469 million and private sector bonds for $ 6.9 million in the 6 weeks between November 6 and December 18. The total inflow of the portfolio was 3 thousand 973 million dollars.

$ 1.6 billion of the $ 1.7 billion in bond inflows in the week of December 11-18 were recorded as buybacks.

Between December 27, 2019 and November 6, 2020, foreigners made a total output of $ 13.7 billion, including $ 5.8 billion in stocks, $ 7.6 billion in government bonds, and $ 194 million in private sector bonds. Thus, in 2020, foreigners signed a portfolio outflow of 9.7 billion dollars.

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HIGH INTEREST INCREASED EXCHANGES

The other entry channels in Turkey’s hot currency exchanges (TL currency exchange). Foreigners sell currencies at the spot exchange rate and buy TL. They give the TL that they buy from Turkish banks with swap (currency swap-TL for a certain maturity) and receive foreign currency in return. It accrues TL interest based on the maturity of the swap transaction. Since TL’s real interest has risen recently, inflows through the exchange channel also increased.

According to the calculations made by the economist Haluk Bür Spiderçi from the off-balance sheet foreign currency data of the banks published by the Banking Regulation and Supervision Agency (BRSA), the entry of foreigners through the exchange channel was approximately billion dollars between November 11 and 18.

It is not known exactly how much foreigners entered through the swap channel and the size of the derivative position adopted in favor of TL, but the data indicates that the total entry for the period between November 6 and December 18 could be around $ 11 billion.

Thus, the total inflows of foreign hot money in 6 weeks reaches approximately 15 billion dollars.

CONTINUE TO RECEIVE LOCAL EXCHANGE

While foreigners exchanged currency and bought TL, local purchases of foreign currency and gold continued in the last 6 weeks.

According to CBRT data, residents’ foreign currency deposits amounted to $ 234.1 billion with an increase of $ 9.9 billion in this period.

Since the beginning of the year, the increase was 40.5 billion dollars due to the effect of increases in the gold / dollar and euro / dollar parity.

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