The dollar/TL exchange rate, which decreased last week with the interest rate increase of the Central Bank (CBRT) but gradually increased again, started today at 32.30 per day.
Dollar/TL started the day around 32.30, approaching historical peaks again after the limited decline experienced with the interest rate increase. The data agenda will be followed in the markets today before the local elections to be held on Sunday.
Today’s domestic data agenda includes March economic confidence index, BRSA weekly banking sector data, Central Bank (CBRT) Monetary Policy Committee (MPC) meeting summaries, and CBRT weekly money and bank, foreign exchange reserves and securities movements.
Last week, the CBRT increased the policy rate from 45% to 50% and expanded the interest rate corridor. The overnight lending rate, which constitutes the upper band of the CBRT’s interest rate corridor, increased to 53%, and the late liquidity window interest rate increased to 56%. This increase gave the CBRT the possibility of tightening the policy rate by 600 basis points with its liquidity policy.
Thus, the CBRT has increased interest rates by 4 thousand 150 basis points so far, with the tightening steps supported by President Tayyip Erdogan after the general elections held last year.
Following the February inflation data, which exceeded the forecasts and showed that core indicators remained high, inflation expectations were gradually being revised upwards, moving away from the CBRT’s year-end forecast of 36%. The impact of the CBRT interest rate increase on expectations, especially inflation, began to be closely monitored in the markets.
EXTRAORDINARY GENERAL ASSEMBLY MEETING BY CBRT
The CBRT extraordinary general assembly meeting will also be held today. The agenda includes changing the articles of association to its pre-2019 state, such that the general assembly will meet “in April of each year and on the day to be determined by the Bank Assembly”. There are no other agenda items at today’s meeting.
The rise in Dollar/TL at the beginning of March accelerated slightly due to the high local foreign exchange demand before the local elections. However, after the interest rate increase, the exchange rate dropped from its historical peak of 32.4260 to below 32. After the fluctuation, the exchange rate has largely returned to the gradual upward trend it has maintained since September 2023. Dollar/TL started the day this morning by getting closer to its historical peak around 32.30.
Having lost 2.7% in January and 2.9% in February, the depreciation of TL since the beginning of the year reached 9% and then slowed down to 8.6%. According to these data, TL will complete the first quarter with a depreciation of nearly 9%.
RESERVE LOSS CONTINUES
As for the TL-settled forward foreign exchange sales that the CBRT started in March, the stock is around $4.2 billion as of yesterday.
According to bankers’ calculations, CBRT’s net and gross reserves continued to decline last week. Net reserves decreased by approximately $4.5 billion last week, a significant part of which was before the interest rate increase. According to calculations, CBRT’s total reserves decreased by approximately $4.1 billion last week, falling to $123.8 billion. Read full story
Calculations show that net reserves excluding swaps decreased by approximately $5.5 billion last week, reaching around minus $65 billion.
GLOBAL MARKETS
The yen has fallen to its lowest level in more than 30 years, although investors are cautious about betting on the currency devaluing due to the possibility of market intervention.
Markets remained in a narrow range ahead of the personal consumption expenditures (PCE) data, which is the inflation indicator preferred by the US Federal Reserve (Fed). Markets will remain closed tomorrow in most countries due to Easter.
Source: Patronlardunyasi / Prepared by Irem Yildiz