The US dollar, which has been breaking record new levels in value against the Turkish lira (TL), finally started to “cool down” following intervention by the Central Bank of Turkey late on Wednesday.
The central bank on Wednesday said it had decreased the required foreign exchange reserve ratio by between 0.5 and 2.5 points. Following the move, one US dollar traded at TL 1.84 on Thursday. This level was TL 1.88 on Wednesday. Earlier, the dollar reached its peak of TL 1.91, raising concerns in the markets. A second move came from the CB late on Thursday as the bank decreased the required TL reserve ratio too. The cut was made to provide foreign exchange at a lower cost to the Turkish banking system, while at the same time bolstering the buildup of the central bank’s foreign exchange reserves. Observers said the bank intervened “on time” before the foreign currency gained further value against TL.
Evaluating the move, Yapı Kredi chief economist Cevdet Akçay said the bank decides on its maneuvers based on “strong indices.” Attributing the overheating dollar to negative developments in global markets, Akçay said the central bank was not much in favor of interventions in the market and that they assessed the outcomes of any such move with comprehensive risk analysis. Akçay, however, also noted that the bank would not refrain from intervening once again should they anticipate similar moves of the dollar in coming months.
Turkish Exporters’ Assembly (TİM) head Mehmet Büyükekşi said the latest move was an “impact test” for the central bank, arguing: “I think the bank has shown they have the power to make such arrangements in money markets. … The central bank will maintain stability in markets as long as they continue injecting confidence with such maneuvers.”
06 October 2011, Thursday / TODAY’S ZAMAN, İSTANBUL