Report: Turkey digs into reserves to keep lira steady amid tremors
Turkey's central bank used $7 billion of reserves in the last two weeks to help steady the lira in the aftermath of Feb.6 earthquakes.
The reserves could remain under pressure in the following weeks, Reuters said on Tuesday, citing bankers without identifying their names.
After two massive tremors that hit Turkey’s southeast, Turkey suspended trading in stock market for about a week after main index fell sharp on Feb.8. It was recorded as the first market-wide suspension of trading in Istanbul since the 1999 Marmara earthquake.
However, in foreign exchange markets, the lira has shed only 0.2 percent against the US dollar since the initial quake on Feb. 6, Reuters said.
FX reserves dropped by $4 billion to $125.6 billion in the week after the tremors, it said, citing central bank data. Calculations from three bankers show they dropped another $3 billion last week, Reuters said.
While the central bank declined to comment over the issue, a bank’s trading desk manager told Reuters that the central bank has balanced the FX market by "channelling its new forex revenues, especially from exports, to the market for a long time now."
"This (tapping reserves) cannot be sustained for a long time since the reserve adequacy is low. So I expect the continuation of the steps to reduce the foreign exchange demand," the banker said.
According to Reuters, dipping into reserves has been a regular feature of Erdogan government's “unorthodox economic policy” in recent years.
“The central bank replenishes its reserves in several ways, including requiring exporters to sell a portion of revenues to it, and urging companies and individuals to convert hard currencies for FX-protected lira deposits, or KKM,” Reuters said.