Turkish lira strengthens as dollar nears one-month low at ₺32.15

The Turkish lira strengthened as the dollar fell to ₺32.15 due to global factors, including a drop in U.S. Consumer Price Index, with $2.5 billion in inflows signaling a potential stabilization of lira rates

In a recent development, the dollar price in the free market has dipped to ₺32.15, nearing its lowest point in the past month.

This decline can be attributed to several factors, including a drop in the April Consumer Price Index (CPI) figures in the U.S. and significant losses in the global dollar index, which have had reverberations domestically. Analysts anticipate a continued weak trajectory for the dollar against the Turkish lira, buoyed by the country’s tight monetary policy.

The dollar’s recent stagnation, lingering below the ₺32.5 mark alongside the Central Bank of the Republic of Türkiye’s stringent monetary measures, has suddenly accelerated. Despite the central bank’s accumulation of reserves exceeding $40 billion over the last six weeks and efforts to balance macroeconomic factors in export and import dynamics, the exchange rate has remained above ₺32.

Global weakness in dollar index

However, this week’s macroeconomic data from the U.S., supporting the Federal Reserve’s interest rate reduction strategy, has initiated a global dollar depreciation trend.

The dollar index, which peaked at 106.5 earlier in May, has now dropped to 104.2, indicating a notable weakening trend. Particularly, the recent U.S. CPI data for April, showing a decrease to 3.4%, along with a drop in core inflation from 3.8% to 3.6%, has hastened the decline, breaking the 105 threshold that served as a base for the past month in the U.S. dollar Index. As a result, the euro/dollar pair has witnessed movement from 1.08 to 1.09.

The waning strength of the dollar in global markets is mirrored domestically, with the dollar price on May 16 reaching ₺32.15, edging closer to recent lows. In exchange offices, initial transactions saw the dollar trading within a range of ₺31.98 and 32.13. Concurrently, the euro saw modest gains due to parity effects, with initial transactions hovering around a selling price of ₺34.97.

Türkiye records $2.5B inflows amid dollar decline

Analysts posit that if forthcoming U.S. economic data continues to support declines in the dollar index, it could positively influence the dollar/TL rate. A drop below 103.5 in the dollar index may accelerate capital inflows to developing nations, potentially positioning Türkiye advantageously in this scenario.

Over the past five weeks, nearly $2.5 billion of inflows have been recorded in Türkiye solely through bond and stock investments. The continuation of this trend is deemed significant for both the stability of the dollar/TL outlook and the gradual commencement of declines in TL interest rates.

Source: Newsroom