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Total reserves increase by $41. 5 billion since June
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Capital inflows accelerated, calculations show
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U-turn towards policy orthodoxy after May elections
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By Nevzat Devranoglu
ANKARA (Reuters) – Turkey’s central bank’s general reserves jumped to a record high of more than $140 billion, estimates by five bankers showed on Tuesday, maintaining an upward trend after adopting more orthodox policies following May’s election.
The rising reserves, alongside 3,150 basis points in interest rate hikes since June, have marked a departure from years of unorthodox and at times erratic policymaking – and some foreign investors are taking note.
Including the most recent increase from $3. 5 billion to $3. 8 billion in the week leading up to Dec. 1, overall reserves have risen to $41. 5 billion since June, when President Tayyip Erdogan appointed former Wall Street banker Hafize Gaye Erkan as central bank governor.
Ankara has also abandoned its practice of using its reserves to directly prop up sterling and has sought to roll back strict money market regulations to its policy shift.
The central bank commented on the reserve figures. Official knowledge will be released on Thursday.
The five bankers provided Reuters with figures on the central bank’s balance sheet calculations.
Those calculations showed that net FX reserves were estimated to have fallen $1 billion last week to $35 billion, after having surged more than $40 billion since June.
INVESTOR EXODUS
On June 2, just after Erdogan’s re-election, the central bank’s net reserves were -$5. 7 billion, its lowest point since records began in 2002.
Years of falling rates, skyrocketing inflation and depleted foreign exchange reserves have triggered an exodus of foreign investors from the leading emerging market economy. But the change has sparked renewed interest.
Amundi, Europe’s largest asset manager, told Reuters it had begun to sink again in the Turkish lira, while central bank officials said budgets from U. S. -based institutional investment giants were also starting to pour in.
Hakan Kara, a former central bank chief economist who is at Bilkent University, said the bank’s apparent net purchase of $5.6 billion in the last two weeks suggests that “capital inflows accelerated…probably due to foreign swap entries.”
Still, foreigners own less than 1% of lira-denominated bonds, down from 10% in 2019 and 20% in 2015, according to official data. Investors worry that Erdogan could simply fire the central bank leader and treasury minister and come back. to unorthodox policies.
Still, some primary banks, such as Deutsche Bank and JPMorgan, advise their clients to reconsider Turkish assets; The first says lira-denominated tools may be just one of the trades among emerging markets in 2024.
Turkey’s credit default swaps (CDS), which had reached 700 core issues as of mid-year, fell to 337 on Monday, according to information from S.
The U. S. Treasury on Monday sold benchmark two-year bonds with a compound yield of 40. 51 percent, more than 30 key issues relative to single-digit securities at election time, as they required banks to buy bonds.
Bankers said the latest auctions attracted foreign demand.
The Treasury will sell a four-year TLREF-indexed bond and a 10-year benchmark on Tuesday. It forecasts 45 billion lira in domestic borrowing in December, but borrowing will rise in January and February to 388 billion lira ($13. 3 billion). (Reporting via Nevzat Devranoglu; Editing by Daren Butler and Sharon Singleton)