The upward movement that began with the reduction of intense pressure on the exchange rate of the Dollar has raised the question of whether it will be sufficient to encourage domestic residents to sell the currency they hold.
It is still unknown when and at what level domestic residents will start selling foreign currency while the exchange rate continues to rise.
According to Mehtap Özcan Ertürk’s news in Sözcü, Central Bank of the Republic of Turkey (CBRT) data showed that the sharp decline trend of 6.2 billion dollars in foreign currency deposits in the last week before the elections did not continue after the elections. According to CBRT data, there was a decrease of 1 billion 50 million dollars in foreign currency deposits of domestic residents in the week ending on June 2nd, adjusted for the exchange rate effect. However, only a limited portion of this decrease, amounting to 389 million dollars, was observed in dollar accounts.
The decrease in foreign currency deposits was attributed to a decrease of 602 million dollars from gold accounts. The government went into the elections with the goal of keeping the dollar below 20 Turkish Lira. After May 28th, in the week ending on June 2nd, the dollar settled near 21 Turkish Lira with an approximate 4.9% increase.
Last week, domestic residents’ foreign currency deposits decreased from 176 billion dollars to 175.5 billion dollars. The parities-adjusted decrease of 1.05 billion dollars was contributed by 740 million dollars from individuals and 310 million dollars from companies. During that week, corporate accounts decreased to 70 billion dollars, while individual accounts decreased to 105.4 billion dollars.
Meanwhile, it can be observed that the bid-ask spread of banks, which previously reached around 9-10%, has decreased to around 4-5% this week. As this spread narrows, it is expected that savers who find the exchange rate level sufficient will consider converting their holdings to Turkish Lira, deeming it profitable.