Turkish lira hits record low against US dollar, trading above 33

The Turkish lira plunged to an all-time low against the U.S. dollar, exceeding 33 per dollar just before noon local time. The exchange rate remained stable in April and May following the elections, but it has been rising steadily since the Eid holiday.

Tuesday June 25 2024 02:13 pm

Duvar English

The exchange rate for USD/TL exceeded the 33 mark, signaling a fresh record low for the Turkish lira against the U.S. dollar just after noon on June 25.

The USD/TL closed at 32.86 the previous day and started the day at 32.94 on June 25.

The Turkish lira, which opened at 29.5 against the US dollar at the beginning of the year, has fallen by approximately 11.50 percent in the first six months of 2024. The lira has weakened by around two percent against the dollar since only the beginning of June.

Minimum wage erodes by 63 dollars

At the same day with the historic high, the ruling Justice and Development Party (AKP) deputy chair Hamza Dağ also announced that there would not be any hike in minimum wage.

When it was first announced by the government on Dec. 27, 2023, the minimum wage of 17,002 liras was 578 dollar. As of June 25, it eroded by 63 dollars and fell to 515 dollars.

Central bank takes further measures against overnight rates

Turkish Central Bank's interest rate decision has been among the key agenda items for this week. Additionally, the fact that overnight rates have periodically fallen below the policy rate, including June 24, has also been closely monitored by the market.

According to the Reuters survey, the Central Bank has been expected to leave the policy rate unchanged at 50 percent in June, following the tightening it last did in March to control inflation.

During the first three trading days of last week, Turkish markets were closed due to the Eid al-Adha holiday. Trading volumes remained low during the remaining two days.

During this period, the Central Bank's liquidity measures began to be closely monitored after overnight rates fell below the policy rate. The overnight rate was above the policy rate on June 21 but fell below it again on June 24 to 49.55 percent.

The bank has several factors contributing to the expansion of lira liquidity, including its reserve accumulation reaching $78 billion since the local elections in March.

The bank has been managing lira liquidity by reducing swap transactions with local banks to below $10 billion, increasing required reserves, and conducting repo auctions.

There is an expectation that if the overnight interest rate remains below the policy rate for more than a day or two, the central bank may take further steps in response.