Official data shows Turks were holding record amounts of foreign currencies (forex) and gold totalling $221.04 billion during the last week of October.
The data, from Turkey’s Central Bank, reflects the ongoing woes of the Turkish lira, which has lost 30% of its value against the dollar since the start of the year.
The lira’s continuous downward slide has prompted Turks to ditch the currency in favour of the dollar and other foreign currencies.
According to a report by Reuters, forex deposits and funds, which include precious metals, held by both individuals and corporates in Turkey were up by nearly $0.5 billion from the middle of October when the figure stood at $220.68 billion. Individuals held $137.93 billion of these hard currencies and assets – also a record high.
The official data also showed Turkey’s Central Bank gross forex reserves were down to $42.26 billion as of Oct 30, from $45.09 billion a week earlier.
Forex holdings by Turks have increased by some $27 billion, from $193 billion at the end of 2019.
The acute problems of the declining lira show no sign of abating. Investors are plagued by concerns over whether Turkey will face possible Western sanctions, alongside worries about the country’s depleted reserves, high inflation and political interference in monetary policy.
On 28 October, the Turkish lira’s value had plummeted to 8.2560 per dollar, marking a loss of 28% in ten months. At the time Murat Uysal, the Governor of the Central Bank, defiantly maintained a positive outlook claiming the lira is “extremely undervalued” and that Turkey would still post positive growth this year. However, the Turkish lira has continued to slide.
The lira closed at 11.215 to the British pound and 8.544 against the US dollar on Friday, 6 November, recovering slightly having hit a record low of 8.58 to the dollar earlier in the day.
Within hours, Mr Uysal had been dismissed by Turkish President Recep Tayyip Erdoğan. The governor’s departure was announced in the country’s official gazette early on Saturday.
Mr Uysal was Deputy Governor when he was promoted in July 2019, after President Erdoğan fired his predecessor, Murat Çetinkaya, for refusing to cut interest rates to boost the economy.
Murat Uysal (left) hands over to Naci Ağbal, who takes over as Governor of the Central Bank of Turkey
With a decree published in Official Gazette No.31297 dated 7/11/2020, Mr. Naci Ağbal has been appointed as Governor of the CBRT. At the takeover ceremony, Gov. Ağbal thanked Murat Uysal and Mr. Uysal wished Governor Ağbal success in his new post. https://t.co/qTWQn4JjZx pic.twitter.com/nq2s0kmrhq
— CentralBankofTurkey (@CentralBank_TR) November 7, 2020
The President has appointed Naci Ağbal as the new Governor. Mr Ağbal, previously Turkey’s Finance Minister (2015-2018), has headed up the directorate of the presidential strategy and budget for the past two years.
He faces a difficult tenure as governor, with experts predicting the lira’s decline will continue and hit a new record low of 9 to the dollar.
The election of Joe Biden – who is no fan of President Erdoğan – as US President will add to existing jitters about Turkey in the financial markets.
Main image, top, of a currency exchange bureau board in Eminonu, Istanbul, Sept. 2019. Photo © Melih Evren Burus / iStock