The Turkish lira fell significantly during trading on Tuesday, minutes before the Turkish central bank’s interest rate decision, and despite state banks selling large amounts of dollars to support the local currency.
State banks in Turkey sold the dollar to support the lira as it continued its gradual decline ahead of the central bank’s meeting to set interest rates.
According to Bloomberg sources, state-owned banks’ sales exceeded $500 million on Monday to meet domestic demand.
Earlier this month, it was reported that the Turkish Central Bank intervened to support the lira, which has fallen sharply over the past period.
Turkey’s central bank reportedly injected about $6.6 billion to support the currency at the beginning of August, which could lead to a reduction in foreign exchange reserves by about $6 billion. The reports also expected the lira to continue its decline due to the increase in demand for dollars by citizens, in conjunction with the central bank’s termination of the deposit protection system against exchange rate fluctuations.
The lira continued to slide for the third week in a row, posting the longest losing streak since June 21. It is now down 0.77% to 33.82 liras against the US dollar by 12:03 p.m. Riyadh time.
The Turkish currency falls against the euro to 37.48 liras per euro, by 0.17% during the day.
While the gram of gold denominated in Turkish lira is at 2,742 liras, up by about 1% during today’s trading.
Read also:Bank of America (BofA) optimistic on EUR/NZD amid Reserve cut
Upcoming Interest Decision
The move by state banks to support the lira comes ahead of Turkey’s central bank’s interest rate decision on Tuesday, which is expected to keep it at 50% according to economists’ expectations.
The expected rate fixation comes amid a continued decline in inflation in Turkey, falling to 61.8% in July from 71.6% in June.
In recent months, the central bank has taken advantage of the growing interest in Turkish assets to boost its foreign currency reserves. But amid global volatility in early August, demand for foreign currencies has picked up.
Turkey’s central bank has begun buying the lira through the country’s main clearing house, in a move aimed at diversifying ways it can reduce excess liquidity and keep borrowing costs high.
The bank will begin placing orders to buy the lira at the current borrowing rate of 47 percent, according to a document it sent to the Turkish Settlement and Trust Bank (Takasbank).
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