The Turkish Statistical Institute (TÜİK) said on Oct. 5 that the country observed an 11.75 percent increase in inflation levels from a year ago. While the top statistical authority's credibility has been debated for a while, Johns Hopkins University's Prof. Steve Hanke said that his analyses revealed inflation of over three times the official data for September.
Turkey's depletion of foreign exchange reserves and the fact that a majority of its forex reserves are swap lines has created mass distrust in the economy, Turkish Industry and Business Association (TÜSİAD) Chairman Simone Kaslowski said. Turkey needs to “ensure full market confidence” to attract long-term financing flows, Kaslowski said during a videoconference on Sept. 24.
The Turkish Lira hovered near its historical low against the dollar on Aug. 31 as the Turkish statistical authority revealed a contraction of 9.9 percent in the economy. The currency has lost about 19% against the greenback this year.
For a long time, Ankara had eroded foreign currency reserves worth near 100 billion to hold the rate. Now, it has come to the end of the road. It has spent its last penny and left the rate to the markets. Thus, the “unheard of” invented exchange rate regime has collapsed.
The Turkish Lira has devalued drastically against the dollar, reaching almost seven liras on the dollar. Ankara has invested almost $60 billion in currency interventions in 2020 to no avail, Financial Times reported on July 28.
What would we have included if we wanted to write a guideline for those who have the wish to intervene in foreign exchange rates but who do not have the adequate experience, but at the same time want to do it right? Taking into consideration today’s circumstances in Turkey, here is a list.
The Turkish Lira has further weakened against the dollar, hitting its weakest level since a currency crisis in August 2018. The lira weakened to 7 against the dollar on May 4, after a long stand-off around that level.
As conditions worsen for the households, prospects get darker. It appears that the first wave of the health crisis will be over soon. Brace yourself for the economic downturn that it will leave its wake. That is of course until the pandemic’s second wave.
The gold and dollar exchange rates in Turkey surged to record highs Feb. 24, dropping again on Feb. 25 after markets opened and traders started to sell. Dollar prices rose as high as 6.16 TL during the day, marking a new high for the last 9 months. The price of 1 ounce of gold reached $1,688, and the price of one gram of gold reached a record price of 334 TL.