The dollar/TL exchange rate, which was above 7.10 yesterday, continued its rise with the opening of the markets today and rose above 7.15. While Dollar/TL continues to remain under pressure during the coronavirus period and approaches the historical peak of 7.24 seen in August 2018, the effects of the BRSA decision on the markets and the meeting of Treasury and Finance Minister Berat Albayrak with foreign investors will be followed.
The Banking Regulation and Supervision Agency (BDDK) has made a regulation to limit banks’ some foreign TL transactions.
In the BRSA decision, “…the total of TL placements, TL deposits, TL repo and TL loans to be made by banks to financial institutions resident abroad, including credit institutions subject to consolidation abroad and their partnerships with financial institution qualifications and their branches abroad, are calculated according to the latest legal calculations of the banks.” It was decided to limit it to 0.5% of its shareholders’ equity.”
Although the rise in Dollar/TL became evident during the coronavirus period, it was limited compared to similar countries due to oil prices and the public foreign exchange supply, which reached 30 billion dollars in the first quarter.
However, the depreciation in TL has accelerated in the last few weeks due to the halt in the decline in oil prices and question marks regarding the rapid losses in reserves. Positive divergence from similar currencies gave way to negative divergence.
While TL has lost approximately 16% value since the beginning of the year; The ruble lost 16% of its value, the peso 21%, the rand 24% and the real 28%. The divergence in TL was much more evident a few weeks ago.
Dollar/TL is very close to the historical peak of 7.24, which was last seen on August 13, 2018. Dollar/TL rose above 7.15 this morning and approached the historical peak.
Transactions in the exchange rate take place at the level of 7.1510 as of 11:20. At the same minutes, euro/TL was traded at 7.7350.
Concerns become clear
A bank Treasury official said, “We are following the effects of the gradual opening of the economy on the markets, whether a new foreign currency inflow will be provided to the economy. There will be a sharp contraction in the second quarter, this has been priced in. However, economies in Turkey and the world are gradually opening in May and June.” ‘How much can the damage be reduced? What will be the health impact?’ “The answers to these two questions are very important. This process may also result in a complete change in economic forecasts in a country like Turkey, which needs a new foreign currency inflow,” he said and added:
“The world’s dollar, euro, yen… foreign exchange liquidity is now almost unlimited. We can also see developments that can eliminate short-term capital concerns or investors who want to stay in a safe haven turning to developing countries. This has happened in many crisis exits. However, in the short term, there are concerns.” is becoming evident. Although the BRSA step does not bring a major downward trend in the exchange rate in the short term, it may limit the upward trend somewhat. This is a continuation of many steps taken recently. As confirmed by the REK data announced yesterday, TL is heading towards an extremely undervalued place. Every step that reduces convertibility “If it persists beyond its short-term effects, it will have a negative impact in the medium term.”
Minister Albayrak’s meeting is important
Bankers stated that the results of Albayrak’s meeting with foreign investors at 16:00 today at the conference to be organized by Citigroup and Societe Generale are also important.
In Turkey, isolation practices and measures restricting domestic travel and economic activity are being gradually lifted. After the first case in Turkey on March 10
The restrictions that started this week will be gradually lifted over a period of July.
According to the calendar, shopping malls, clothing retailers and barbers will be able to open as of May 11.
CDS reflects concerns
Turkey’s five-year credit default swap (CDS) premium is at 605/625 this morning, after exceeding 650 basis points and reaching the highest level since the 2008 financial crisis. CDSs were at 240 points at the beginning of the year, indicating the best risk appetite in 20 months.
The Treasury, which completed April with a borrowing of around 65 billion TL, more than twice the predictions, foresees a domestic borrowing of 40 billion TL in the May borrowing program that it started this week.
The Treasury borrowed approximately 20 billion TL with three auctions held in the first two days and reached half of its targets.
While the Treasury debt rollover ratio approached 200%, local banks’ interest in bonds increased after the BRSA’s new asset ratio regulation. Despite the expected increase in the budget deficit and the Treasury borrowing twice as much as it targeted in March, bond yields declined compared to the pre-coronavirus period.
CBRT’s fastest bond purchasing in history also supports the markets. However, the effect became evident after the BRSA’s active ratio.
Following the BRSA’s decision directing banks to give more loans, buy bonds, or make swaps with the CBRT, there were sharp declines in TL-denominated bond yields, and interest in Treasury eurobonds also increased.
The compound yield on the benchmark 2-year bond dropped to 8.71% last week. The yield on this bond was over 12% two weeks ago. Since the BRSA decision, the compound return has fallen by 360 points.
Source: https://www.dunya.com/finans/haberler/dolartlde-yukselis-suruyor-haberi-469613
