By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
IndebtaIndebta
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
IndebtaIndebta
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
Indebta > Markets > Forex > Turkey’s lira hits new low after bank rules’ rollback
Forex

Turkey’s lira hits new low after bank rules’ rollback

News Room
Last updated: 2023/06/26 at 9:03 AM
By News Room
Share
5 Min Read
SHARE

By Orhan Coskun and Nevzat Devranoglu

ANKARA (Reuters) -The Turkish lira slid as much as 3% to a record low against the dollar on Monday, after the central bank took steps to simplify policy, while an official and bankers said the bank had stopped using its reserves to support the lira.

The lira weakened as far as 26.05 against the U.S. currency, surpassing last week’s all-time low of 25.74. It trimmed its losses to 25.84 by 0945 GMT.

It is down 28% so far this year, largely after the re-election in late May of President Tayyip Erdogan who has since moved to backtrack on his years of unorthodox economic policy including slashing rates despite soaring inflation.

Two big steps were taken in recent days: the central bank under new Governor Hafize Gaye Erkan raised rates by 650 basis points to 15% on Thursday, a substantial tightening even though it fell short of market expectations.

Then on Sunday, the central bank began rolling back parts of the dozens of rules and regulations it had adopted since 2021 that left debt, credit and forex markets heavily state managed – and that were meant to encourage lira holdings.

With the use of central bank reserves to protect the lira’s value before the election, reserves fell to a historical low in early June, with net reserves at minus $5.7 billion. They recovered in the following two weeks.

The simplification steps at the weekend were meant to free up markets and ensure stability, the central bank said at the weekend, while a senior official said the bank had adjusted its foreign exchange policy.

“The central bank is not intervening in any way on the exchange rate level by selling foreign currency after its interest rate decision last week,” he said.

“The numbers are determined entirely by the free market. Hence, there is no use of foreign exchange reserves and a period of increasing reserves has started,” he added.

His comments echoed the view of bankers that the central bank had “completely stopped” using its reserves. “The value of the lira is no longer being defended by reserves,” said one trader.

“It seems the CBRT (Turkish central bank) seems to have completely abandoned the use of reserves in the forex market,” said a senior banker, adding that its foreign exchange position showed increases of $1-2 billion a day.

CENTRAL BANK MEASURES

Under new central bank steps announced at the weekend, the securities maintenance ratio that banks are required to allocate to their foreign currency deposit was reduced to 5% from 10%.

Securities that banks must maintain ranged between 3% and 12% of their lira deposits, under the new standard, compared to between 3% and 17% previously.

The new regulation said banks whose lira deposits are less than 57% of total deposits will have to hold an additional seven percentage points of securities, compared to the previous seven additional points applied to banks that held less than 60% lira deposits.

“Ratios were slowly lowered, allowing banks to adjust their positions slowly and not triggering a rapid rise in interest rates, a slight relaxation of the rules would give banks room and time to manoeuvre about their bond portfolios,” said Enver Erkan, Chief economist at Dinamik Yatirim.

“It is a comforting and positive development for the sector.”

The banking stocks index on the Istanbul exchange rose about 4% after the latest moves, with the main index up more than 2%.

Bankers said that after the easing of the measures, which had pushed banks towards lira deposits, deposit rates at some banks had started to fall from the 40-45% band in a move that was expected to continue.

Read the full article here

News Room June 26, 2023 June 26, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
Donald Trump announces trade deal with Indonesia

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

Nvidia and Jane Street back Mira Murati’s AI start-up in latest fundraising

Stay informed with free updatesSimply sign up to the Artificial intelligence myFT…

How one of the gravest security lapses in history was kept secret

It was a lawsuit unlike any other. On August 25, 2023, just…

BlackRock inflows hit after big client withdraws $52bn

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

Trump is flunking his Epstein test

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

- Advertisement -
Ad imageAd image

You Might Also Like

Forex

Thailand’s weakening baht not all bad for economy – PM

By News Room
Forex

Sterling hits multi-month low, Fed holds rates steady amid inflation concerns

By News Room
Forex

Dollar index on verge of forming bullish ‘golden cross’ – BofA

By News Room
Forex

Japan warns against post-Fed yen slide

By News Room
Forex

Asian currencies stumble amid rising U.S. dollar and hawkish Federal Reserve stance

By News Room
Forex

Asian currencies under pressure due to Federal Reserve’s stance, says HSBC

By News Room
Forex

Dollar rallies, yen under pressure ahead of BOJ rate decision

By News Room
Forex

Gambia’s dalasi remains Africa’s strongest currency amid tourism and remittance inflows

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?