Latest news with #lira
Zawya
08-08-2025
- Business
- Zawya
Turkey nears exit from costly FX-protected deposit scheme
ANKARA - Turkey is on the verge of ending a scheme protecting deposits from currency depreciation that is estimated to have cost $60 billion, another step to abandon unorthodox economic policies that triggered a lira crisis several years ago. Turkish officials said the KKM scheme, introduced in late 2021, will be terminated by the end of 2025, though many bankers believe the exit could come even sooner. The value of deposits covered by the scheme has shrunk from a peak of $140 billion to just $11.8 billion, a figure now seen as negligible in the context of Turkey's $1.3 trillion economy. The exit from KKM has progressed much faster than initial market expectations. Under the scheme, individuals and businesses were able to deposit lira in special accounts that were protected against exchange rate losses. The lira lost 44% of its value against the dollar in 2021, 29% in 2022, 37% in 2023, and 16% last year. Finance Minister Mehmet Simsek told Reuters this week the KKM balance had declined steadily thanks to the government's exit strategy and tight monetary policy. The KKM stock has fallen to 478 billion lira ($11.8 billion) from 3.4 trillion lira in August 2023. Its share of total deposits slid to 2% from 26.2%. Until May 2023 elections, the central bank implemented an unorthodox policy, backed by President Tayyip Erdogan, of low interest rates despite high inflation. After securing a new term, Erdogan backed a U-turn towards more orthodox policy, which brought higher interest rates to curb soaring inflation. With inflation having eased to 33.5% from a peak of 75% last year, the bank has begun cutting rates again. According to Reuters calculations based on central bank reports and budget data, the total cost to the Turkish state of the KKM is estimated at nearly $60 billion to the end of 2024 - making it one of the most expensive regulatory measures in Turkey's recent economic history. Last year Turkey ended other such policies, including a rule that forced banks to buy government bonds, effectively ending state control over the bond market. Earlier this year, the opening and renewal of KKM accounts for corporates was halted. Since the return on KKM accounts is capped at 40% of the policy rate, they have long ceased to offer a meaningful alternative to regular lira deposits. As the remaining KKM accounts held by individuals mature, a final regulation is expected to prohibit new openings and renewals, completing the phase-out of the scheme. Meanwhile, the lira has continued to weaken but at a slower pace. This year it has depreciated by 13%. ($1 = 40.6772 liras)
Bloomberg
02-07-2025
- Business
- Bloomberg
Turkish Bonds Erase 2025 Loss After Court Delay Spurs Rally
Turkey's lira-denominated bonds erased their year-to-date losses after a court's decision to postpone its ruling on the country's opposition leader spurred a rally of over 3% in just two days. Two-year yields currently stand at 39.76%, having dropped about 200 basis points so far this week, after the court delayed its ruling on a case that could unseat Ozgur Ozel. That's taken borrowing costs back to levels seen just before the March arrest of Istanbul mayor Ekrem Imamoglu triggered a wave of nationwide protests and fueled a selloff in Turkish assets.
Bloomberg
21-06-2025
- Business
- Bloomberg
Turkey Boosts Reserve Rules on Some Deposits to Support Lira
Turkey raised the amount of cash lenders must park with the central bank against some deposits, as part of measures to support the lira after it became the worst-performer in the Europe, Middle East and Africa region. Reserve requirement ratio for so-called KKM accounts, which compensate depositors for lira depreciation, has been increased to 40% from 33%, the monetary authority said in a statement on Saturday. It also reduced the minimum interest rate such accounts earn to 40% of the policy rate, from 50% earlier.
Bloomberg
11-06-2025
- Business
- Bloomberg
Turkey Central Bank Seeks to Repel Short-Term Carry Trade Bets
Turkish policymakers are taking steps to deter so-called 'hot money' flows into the lira, pushing back against one of the world's most lucrative currency bets. While the central bank has kept a tight rein on the lira market and allowed the currency to slide gradually, traders say market moves have become less predictable lately. On recent Fridays in particular, the lira has weakened three to four times faster than the average pace on other days, according to Bloomberg calculations.
Bloomberg
29-05-2025
- Business
- Bloomberg
Goldman Warns World's Best Carry Trade at Threat From Lira Slide
The most successful carry trade in the world looks vulnerable as Turkey's central bank allows the lira to drop, says Goldman Sachs Group Inc. Turkey's monetary authority is allowing the lira to depreciate against the dollar at a faster pace than usual, possibly to limit hot money inflows and counter exporters' complaints that the currency is overvalued, Goldman economists Clemens Grafe and Basak Edizgil said in a note on Wednesday.
