Markets Await Elections: Limited Upside Continues in USD/TRY

In the last week before the elections, there is a limited upward movement in the USD/TRY exchange rate, which has witnessed significant daily fluctuations. As of this morning, the USD/TRY rate started the day at the level of 19.5080.

According to the data, the Turkish Lira has experienced a depreciation of 3.5% against the US Dollar from the earthquake until today, and a loss of 4.04% since the beginning of the year. Alongside concerns arising from the post-election period, there has been a surge in interest towards currency-protected deposit accounts, reaching record levels.

The Treasury plans to complete the May auctions today with two scheduled auctions. With the May program set to be finalized before the elections, there won’t be any further auctions to be held by the Treasury in the domestic market. This situation holds importance in relation to the upcoming elections.

In May, a total of 103.1 billion TL of domestic debt service is expected to be met with a targeted domestic borrowing of 50 billion TL. Prior to the reissuance of the 5-year fixed-rate and 10-year inflation-indexed bonds scheduled for today, the Treasury has borrowed approximately 30 billion TL.

Borsa Istanbul experienced a decline in seven out of the last eight trading days until the beginning of the week, resulting in a 22.3% decline from the year’s peak. However, it showed an upward trend recently. Yesterday, the BIST 100 index increased by 3.66%, while the banking index rose by 8.37%.

The Depreciation of the Turkish Lira is Directing People Towards Foreign Currency

Increasing views suggest that with the current policies, the USD/TRY exchange rate is lower than what is determined by the government prior to the elections, and there is a growing opinion that the Turkish Lira needs to depreciate. These factors contribute to the increased interest in foreign currency.

It is anticipated that the Central Bank of the Republic of Turkey holds approximately 100 tons of gold reserves, which are expected to be utilized to meet local demands.

The Usage of Currency-Protected Deposit Accounts has Reached Record Levels

Currency-protected deposit accounts are also attracting significant attention at record levels due to post-election concerns in the foreign exchange market. These accounts experienced a substantial increase of $17 billion during the last three weeks of April, reaching a total level of $109 billion.

Meanwhile, the British Pound is nearing its one-year high as expectations rise for an interest rate hike by the Bank of England (BOE) this week. The anticipation of a BOE interest rate increase is supporting the value of the pound.

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