The Turkish Lira has dropped to alarming rates, reaching almost seven liras on the dollar, proving traders’ efforts to stabilize it ineffective.
The sharp decline followed an abrupt devaluation on July 27, the first since around mid-June when the government was able to stabilize exchange rates around 6.85 TL/$.
London-based traders have predicted Turkish state banks sold around two million dollars worth of bonds and loans to diminish the quantity of cash in circulation and bring the lira-dollar exchange rate back down to no avail, Financial Times reported on July 28.
Investment bank Goldman Sachs predicted Ankara spent around $60 billion on currency interventions in 2020, which emerging market currency strategist at Rabobank Piotr Matys said would be unsustainable.
Meanwhile, Matys noted that the drop in lira-dollar exchange was surprising considering the latter is losing value against other currencies.
“The dollar is soft and yet the lira is not benefiting at all,” Matys said to Financial Times.
While Turkey’s gross foreign currency reserves have hit a new low in 2020 at $89,5 billion, net foreign assets have dropped to a record $32 billion which Matys said was “worrisome.”