After the elections on May 28th, the Turkish Lira rapidly started losing value against the dollar.
According to Bloomberg, this rise in exchange rate is attributed to the cessation of intervention by public banks in the market. On the other hand, Reuters stated that the decrease in the Central Bank’s reserves was the cause of the depreciation.
The USD/TRY exchange rate, which started the week at 21.20 TL, closed at 23.45 TL after five days of trading. The Turkish Lira experienced an approximate 10% depreciation, reaching the 23.90 range during the week.
Financial markets are now trying to predict where this upward trend will stop.
Many economists and financial experts believe that the Central Bank of the Republic of Turkey’s (CBRT) interest rate decision in June will be crucial.
Eğilmez, “If the Central Bank of Turkey starts normalizing the interest rate, the exchange rate will retreat.”
Professor Dr. Mahfi Eğilmez shared his views on the depreciation of the Turkish Lira against the dollar and euro on his social media account.
Mahfi Eğilmez tweeted, “Some friends claim that the current interest rate data suggests that the USD/TRY exchange rate should be higher.”
“The real mistake is not the exchange rate but the interest rate. If you ignore the mistake and look at the situation, you would think that the exchange rate should increase even more.”
“If the Central Bank of Turkey starts normalizing the interest rate, the exchange rate will retreat.”