Dollar remains stable at TL 32.38 amid changing market dynamics

The dollar began the day at ₺32.38 on Wednesday, maintaining a stable range of ₺32.27-₺32.38 in exchange offices. Overnight, Turkish lira interest rates inched toward the 50% threshold, indicating a potential policy rate adjustment.

Economists caution against premature interest rate cuts to prevent escalating dollarization risks, especially in FX-indexed accounts.

Economic stability signals on track

Recent economic indicators suggest the planned “stabilization” process is progressing as anticipated. The annual current account deficit continues to shrink, with no red flags in bank or private sector external borrowings.

Tourism revenues are on the rise, with an expected $60 billion in income projected for the year. Strong portfolio inflows have boosted the Central Bank of the Republic of Türkiye (CBRT)’s net reserves, excluding swaps, to $6 billion.

June 12 dollar rate outlook

In the context of increasing foreign exchange supply, exchange rates remain steady. The June 12, 2024, dollar rate holds at ₺32.38, with exchange office transactions ranging between ₺32.27-₺32.38. The euro opens at ₺34.78 for “selling.”

CBRT strategy post-elections

CBRT’s role as a buyer near the ₺32.00 mark post-local elections prevented rapid exchange rate declines. Disruptions in Foreign Exchange Deposit Account (DTH) and Foreign Exchange Deposit Account (KKM) have also curbed dollar demand during this period.

Attention on FX-indexed accounts

Market discussions center on potential interest rate cuts. With CPI’s base effect, a decline towards 50% within 2-3 months is anticipated, possibly prompting rate adjustments. Economist Altug Ozaslan advises against premature cuts, emphasizing the significance of monitoring FX-indexed KKM accounts.

Consumer trends under scrutiny

Tight monetary policies are impacting retail sales. While April saw a 10.2% year-on-year increase, there was a 1.8% monthly decline. Notably, sales of electrical appliances, furniture, and computers dropped, signaling potential relief in future inflationary pressures.