Markets trapped between two ballot boxes

THIS As Turkey is locked in the second round of the elections, investors will try to protect themselves from possible high volatility in the markets. Despite the successive decisions taken by the Central Bank (BC) to limit the rise in exchange rates during the electoral process, the demand for foreign currency has increased rapidly since the announcement of the electoral calendar, and a sustained appreciation has been observed. of the dollar Economists point out that a radical change in monetary policy is inevitable, no matter who wins at the polls with the end of the electoral process. Since the official announcement to go to the polls on March 10, TL has lost more than 4 percent in value. The increasing difficulty in accessing foreign exchange in the markets and concerns from citizens that a currency shock could occur after the elections increased interest in the Grand Bazaar. The gap between interbank markets and Grand Bazaar exchange rates also widened.

THE LYRA CRISIS MAY HAVE

As the dollar in the Grand Bazaar rose to 23.48 lira before the first round of the election, it was beginning to approach bazaar prices in interbank markets. The CBT’s net FX position, excluding swaps and treasury assets, declined to minus $73.4bn on May 12, a major factor adding to market concerns. European Bank for Reconstruction and Development (EBRD) Regional Chief Economist Roger Kelly, in his assessment during the week, emphasized that the economic policies that Turkey will implement in the near future are extremely important, noting that if the policies are adopted wrong, a lira crisis may occur.

The stock market can fluctuate

At Borsa Istanbul, the fluctuation is expected to continue this week as well. The BIST 100 index ended the week at 4,501 points with a loss of 6.13 percent. With the reinforcement of expectations that Alianza Nación could win the first round of the elections, foreign investors who entered the stock market before May 14, the uncertainty heightened after the first round, quickly left the stock market. With the removal of the upper limit on interest rates, the rising interest in Currency Protected Deposits to hedge against inflation also puts pressure on Borsa Istanbul.