ANKARA: Turkey’s central bank has scaled back its currency interventions in January but still spent as much as $1 billion last week to keep the lira steady after last month’s extreme volatility, according to the calculations of bankers and economists.
Data shows the bank sold nearly $20 billion in foreign reserves in December to underpin the currency as it whip-sawed from 18.4 to 10.25 against the dollar, rattling the major emerging market economy and sending inflation soaring.
This month, the lira has settled into a tight range around 13.5 that several bankers described as a managed exchange rate or “dirty float”, after the government took several steps to boost public confidence and official reserves. Among the measures are central bank purchases of 25% of exporters’ hard currency revenues and entire payments from foreigners into a citizenship-for-homes programme, as well as hard currency transfers into a new deposit-protection scheme.
Four bankers told Reuters the measures have beefed up central bank currency reserves, even as data suggested the bank continued to sell dollars, albeit at a smaller scale than in December when they were easier track.
The central bank’s reserves were $600 million to $1 billion short of what would have been expected after last week’s dollar-buying, according to three bankers’ calculations of leading indicators and official data.
That suggests the dollar-selling interventions totalled $600 million to $1 billion, they said, citing central bank balance sheet and reserves data, as well as lenders’ official deposits. “The central bank not only buys some foreign currency that comes to the market but also its reserves sales are continuous, (resulting in) a forex regime directed by the state,” said a senior banker who requested anonymity. The central bank has not formally announced a market intervention since mid-December. It declined to comment on any recent interventions and the bankers’ calculations.
Bank Governor Sahap Kavcioglu on Thursday downplayed claims of reserve sales and repeated no interventions took place on Dec. 20 when the lira mounted its all-time biggest daily rally. He told a news conference that a drop in net foreign reserves to $7.55 billion in mid-January, a 20 year low, was due to market volatility and demand from state institutions.
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