Turkey: Increase in foreign currency deposits of companies

According to the weekly data of the Central Bank of the Republic of Turkey, total foreign currency deposits increased by 769 million dollars in the week of June 24, adjusted for the parity effect. Compared to the previous week, foreign currency deposits of real persons increased by 78 million dollars, while foreign currency deposits of legal entities increased by 691 million dollars.

The Central Bank’s net international reserves increased by $150 million last week. According to the CBRT’s weekly data, net international reserves rose to $7.53 billion as of June 24. Gross reserves rose to $101.9 billion. Net reserves excluding swaps decreased. Net reserves excluding swaps were recorded as minus $54.6 billion as of the week of June 24. The size of FX-protected deposits, which is also taken into account on the basis of reserves, exceeded 1 trillion TRY. In the week ending June 24, FX deposits of domestic residents increased both individually and corporately.

Foreign investors’ outflows from TRY securities continued last week as well. Foreign investors sold $98.4 million in stocks and $57.7 million in government securities during the week of June 24, according to the Central Bank’s weekly securities statistics. While estimating the value of TRY becomes increasingly difficult, the risk-averse tendency created by the Russia-Ukraine war may continue to suppress portfolio inflows as foreign investors’ indifference to TRY assets continues.

Credit default swaps continue to rise as the Turkish lira fluctuates. The 5-year CDS climbed past 848, the highest level since mid-June. Sources close to the subject stated that public banks are defending the exchange rate with their foreign exchange sales above 16.70 levels. State banks do not comment on their interventions in the foreign exchange market.

At the current level, we will continue to follow the trends in the FX-linked product focused on dollarization, reserve cumulation and financial stability. Although the decline in foreign currency deposits has slowed down since March, FX deposits of real and legal persons have been withdrawn by a total of 23.6 billion dollars since the beginning of the year. In addition, although a breakdown of FX and TRY accounts has not been published, we consider this distinction as 55% conversion from FX to TRY and 45% direct TRY account opening in line with the statements of the Ministry of Treasury and Finance. The financial dollarization rate is at the level of 56.29% as of the week of June 24, there is no more change than the rate that was 56.32% in the previous week. This rate was 55.4% in the same period of the previous year.

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