Turkish president Recep Tayyip Erdogan appointed former finance minister Naci Agbal as the new Central Bank governor replacing much-criticized Murat Uysal over the weekend which caused appreciation of the Lira nearly 4 percent on Monday morning as the markets opened.
Turkish Lira has been steadily losing value against foreign currencies. Lira started the year against the dollar around 6 at the beginning of the year but sinked to 8.50 recently over foreign reserves shortage. A US dollar was over 8,50 to a Turkish Lira on Friday night and the rate went down as low as 8.21 on Monday morning before TRY losing some grounds. Euro has also sinked to 9.80 after seeing levels around 10.20 on Friday against TRY.
Analysts say that the Lira’s appreciation has been caused by the new appointment to the top seat of Turkish Central Bank. TRT World’s Yusuf Erim reiterated that the new CBRT head Agbal needs to increase the interest rates on first monetary policy meeting to build further confidence in markets. CBRT’s next monetary policy meeting to take place on November 19th. Agbal said in his first public comments that CBRT will be in a review mode until the next meeting. Erim also pointed out on his Twitter feed that markets are aware that TRY has long been undervalued but also said finance minister Berat Albayrak’s unconfirmed resignation might have some effect on markets as well.
Albayrak announced on his official Instagram accounted his recognition on Sunday night as his 2-million-followered Twitter account was also shot down. Turkish government has yet to make any official comment on Albayrak’s alleged resignation.
Turkish Lira’s much-needed gain provided some breathing room for the government and the private sector. Turkish daily Dunya columnist Ozcan Kadioglu pointed out that TRY hike over 3 percent against the dollar dropped Turkey’s foreign depth 20 billion Turkish Lira (nearly $3B). Turkey’s foreign depth has been one of the lowest among G-20 amounting to around 30 percent of its gross domestic product. The European Union’s depth/GDP ratio is at 70 percent.