Turkey’s total reserves hit record high $137bn

Reuters/Cagla Gurdogan

The Turkish central bank’s total reserves rose $2 billion last week to a record of $136.5 billion, five bankers’ calculations showed on Tuesday, sustaining an uptrend after it adopted more orthodox monetary policy since June.

The central bank has raised interest rates by 3,150 basis points since June, when President Tayyip Erdogan appointed former Wall Street banker Hafize Gaye Erkan as its governor. It has hiked its policy rate by 500 points in each of the last three months.

Alongside the rate hikes, Ankara’s move towards policy orthodoxy after elections in May has included abandoning a practice of using reserves to support the lira.

The central bank did not comment on the reserves figures. Official data will be released on Thursday. The previous all-time high for total reserves was $135.96 billion in December 2013. Since June they have surged $38 billion.

Bankers’ calculations also show that the central bank’s international net reserves were estimated to have risen $6.6 billion to $7.0 billion last week, rising from $29 billion to near $36 billion.

On June 2, just after Erdogan won re-election, net reserves were minus $5.7 billion, their lowest since data publication began in 2002. Since June, net reserves have surged more than $41 billion.

As a result of the previous unorthodox policy – primarily keeping interest rates low despite high inflation – foreign investors have steered clear of Turkey. However, the policy U-turn has led to renewed cautious investor interest.

Recent reports, including from institutions such as Deutsche Bank and JPMorgan, say that lira-denominated instruments may be one of the best trades among emerging markets in 2024.

The lira has slumped in the last three years after a currency crisis in late 2021. This year it shed 35 percent against the dollar.  

Central bank officials told Reuters last week that they had begun to observe fund inflows into the lira “by large-scale institutional investors located on the US west coast.”

The central bank said this month it will hold an “Investor Day” meeting in New York on January 11 in what it described as the first such meeting in this format.