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The dollar rate fell below 8 TL rapidly in the new trading week after hitting the 8.58 level last week. While the Turkish lira was the currency that gained the most value of the week against the dollar, it also recovered its losses in the last month. In the fluctuation of the dollar, the coronavirus, geopolitical risks abroad and the dynamism in the economic agenda became prominent factors. This is what happened in the last month on the forex front.
With the summer months behind, the coronavirus accelerated the portfolio outflows of developing countries due to the increase in global cases and the fear of the second wave, and with the increase in consumer inflation, the Central Bank took action at the meeting September PPK.
The CBRT increased the policy rate by 200 basis points in September, instead of the indirect tightening it did with liquidity instruments. Within the scope of BRSA’s normalization steps, the exchange rate, which changed hands from 7.90 prior to the decisions, was lowered to the 7.60 level, as foreign banks extended their swap limits by the purchase address of TL.
RISE UP QUICKLY AFTER THE OCTOBER MEETING
Although the markets bought an additional rate hike before the CBRT meeting in October, contrary to expectations, the balance in TL was replaced by a depreciation with the benchmark interest rate, while the exchange rate increased from 7.79 to 7.93 the same day.
Despite the global depreciation of the dollar index, it continued to appreciate against TL until last Friday. The rapid depreciation of the LT was driven by concerns about the Central Bank’s reserves, upcoming payments on the private sector’s external debt, the policy rate below inflation, and the growing current account deficit.
The flow of news abroad also fueled the negative trend. The news flow and the threats of sanctions that Biden widened the difference in the elections, the call for a boycott against France and questions about exports to the EU, the boycott of Turkish products by the Gulf countries and the conflicts between Azerbaijan and Armenia boosted currencies. The dollar / TL broke the eighth level on October 26 and renewed its historic high.
CHANGES IN THE MANAGEMENT OF THE ECONOMY
In presenting the last inflation report of the year, CBRT Governor Uysal claimed that TL was extremely unhelpful and announced that the year-end inflation forecasts were revised up, but did not take a clear stance on the rate hike expected by markets ahead of MPC meeting in November. Stating that the CBRT does not have a currency target, Uysal said: “We should focus on funding. The late liquidity window should be seen as the upper limit.”
The dollar / TL quickly lost value in the 10-day period from late October to November 6, reaching 8.58. Euro / TL exceeded 10.20. Turkey’s risk premium has exceeded 570.
On Saturday, November 7, there was an unexpected change in CBRT. Instead of being fired, Murat Uysal 64 Turkey Naci, who served as finance minister in the government, was brought in Ağbal. Although the reaction of the markets was expected after the decision made on the day the markets closed, the economic agenda was shaken with the resignation of the Minister of Finance and Finance, Berat Albayrak, on the night of Sunday, November 8 .
AĞBAL MESSAGE AND RETURN
While uncertainty remains as to whether Albayrak’s resignation will be accepted, TL began to appreciate in Asian markets. The positive trend in the surface market continued in the open markets on November 9. The exchange rate, which was based on 8.60 over the weekend, rose to 8.20 TL. TL appreciated by 5 percent.
Naci Ağbal, who started working at the CBRT with the exchange rate fluctuating between 8.20-8.40 for a period, said: “Until the Monetary Policy Committee meeting on November 19, 2020, the current situation and expectations will be reviewed. and developments will be closely monitored, necessary policy decisions will be made in light of the data and evaluations that are formed. ”He turned down with his explanation.
and the possibility that changes in the Central Bank policy will establish the disappearance of uncertainty Albayrak’s resignation accepted and the positive impact of Lutfi Elvan’s market-friendly transformation TL message on Turkey’s CDS premium has been reduced less than 500.
TL PRESSED IN GAS AFTER PRESIDENT ERDOĞAN’S STATEMENTS
Speaking at the AK Party group meeting today, President Tayyip Erdogan stated that he has entered a new era in which they will reduce the risk premium by focusing on gaining trust and credibility in the economy, and announced that they will build the economy on three pillars. : price stability, financial stability and macroeconomic stability.
Erdogan said: “We will reduce the country risk premium. We will provide all kinds of support to investors who trust the Turkish lira and the Turkish economy. I believe that our minister and the new director of the Central Bank will carry their objectives in accordance with the basic approaches. as soon as possible. I would like to declare that I support them. We are determined to bring inflation down to single digits as soon as possible. ” said.
After President Erdogan’s statements, the appreciation in TL became more apparent, while the dollar / TL decreased to 7.85. The euro is in the 9.25 band. TL’s daily earnings exceeded 3 percent.
