Turkey has spent approximately $12 billion to stabilize its currency against global market disruptions caused by the war, which is about 15% of its foreign exchange reserves.
Turkey has taken significant measures to support its currency, the lira, following substantial global market disturbances linked to the war in Iran. Over the course of a week, the Turkish government invested roughly $12 billion, equivalent to about 15% of its foreign exchange reserves, in a bid to restore stability amidst ongoing economic pressures. This intervention highlights the severity of the financial challenges faced by Turkey as it navigates the impact of external conflicts on its economy.
In response to the currency depreciation, the Central Bank of Turkey tightened liquidity conditions before the start of the trading week. Local banks intervened by selling US dollars in order to mitigate the volatility of the lira. Reports indicate that this dollar selling activity gradually decreased throughout the week, with no similar actions recorded on Thursday, allowing for a relatively stable performance of the lira despite the broader downturn experienced by many emerging market currencies.
Analysts suggest that if the disturbances related to the war in the Middle East are resolved quickly, it may lead to a return to a degree of market stability. However, they caution that a prolonged crisis could lead to increased pressure on high-risk assets globally, indicating potential challenges ahead for both Turkey and other nations experiencing similar economic vulnerabilities.
