A man shows dollar banknotes at an exchange office in Istanbul, Türkiye, May 29, 2023. (Photo by Omer Kuscu/Xinhua)
by Zeynep Cermen
ISTANBUL, May 30 (Xinhua) -- The Grand Bazaar, Istanbul's financial hub full of exchange offices, was a hive of activity on Monday, a day after the critical presidential election runoff.
Many Istanbulites flocked to the bazaar to exchange their dollars at high rates or get the most out of their trade interactions through the advantages of the open market.
One question was hovering in the air: What will be the future of the Turkish currency against the greenback?
Currently, all eyes are on Türkiye's economic woes, particularly the high cost of living and devaluation of the local currency after President Recep Tayyip Erdogan won a hard-fought election on Sunday to serve for another five years.
After testing 20.90 levels on Monday morning, the dollar-lira exchange rate stood at 20.70 at 1:30 p.m. local time (1030 GMT). Meanwhile, at the interbank exchange rate, one dollar increased to 20.10 Turkish liras the same day from 19.96 on May 26.
Resat Yilmaz, who has been in the gold and foreign exchange business in the Grand Bazaar for about 40 years, said the uncertainty had been partly lifted after the election. However, he said the new government's fiscal policies would still be determinant.
"What kind of road map is going to be drawn by the new economic management? This is indeed a matter of curiosity in the markets," Yilmaz told Xinhua.
Erdogan has long been pursuing unorthodox policies on low-interest rates, claiming that such policies will reduce inflation. His government also introduced a currency-protected lira deposit scheme, which encourages the conversion of foreign exchange deposits into lira.
But against all odds, the lira lost around 60 percent of its value against the dollar in the last two years.
"Our country's biggest problem now is the rapid melting of the Turkish lira," Yilmaz noted. "Of course, the previous frequent changes in economic governance have also worried the markets, which need constant confidence and stability."
Turks have long been suffering from the high cost of living, driven by soaring inflation, which hit a 24-year high of 85.5 percent in October last year before falling to 43.68 percent in April.
According to Ekrem Yumlu, a shop owner in the busiest Taksim neighborhood, the depreciation of the lira affects the purchasing power of the citizens seriously as Türkiye is an import-dependent country in many sectors.
"The prices of these products are constantly rising in dollar terms. Purchasing power is decreasing significantly. There is a huge gap between prices on the domestic market and people's incomes."
According to Murat Tufan, an analyst with the Ekoturk broadcaster, the main problem is a "shortage of dollars" in the Turkish markets due to the country's unorthodox fiscal policy.
"Since there are no dollars in Türkiye, we have seen that the net reserves of the Central Bank of the Republic of Türkiye, including swaps, have fallen to a deficit for the first time," Tufan told Xinhua.
"If Mr. Erdogan appoints a new economic management as a matter of urgency and if the markets are convinced of its independence, I am sure that Türkiye very quickly will attract the dollar and all the lost foreign investment back into the country."
Türkiye's central bank, meanwhile, set the forward hedging rate for institutions and companies at a higher exchange rate.
According to Tufan, this is a deterrent measure of the central bank to reduce the demand for the dollar. The current estimation of the value of one dollar at this rate is around 23-24 Turkish liras for an upcoming certain period.
Meanwhile, Yilmaz believes that with the arrival of foreign tourists in the summer months, the lira may have some appreciation due to the influx of hot foreign currency into the country, but this will be temporary.
"Now that the election process is over, the markets have relaxed. But there is still a problem of confidence. If there is certainty in the markets, it will be positive for all of us," he added. ■
A woman visits an exchange office in Istanbul, Türkiye, May 29, 2023. (Photo by Omer Kuscu/Xinhua)
A man checks currency rates at an exchange office in Istanbul, Türkiye, May 29, 2023. (Photo by Omer Kuscu/Xinhua)
People walk past an exchange office in Istanbul, Türkiye, May 29, 2023. (Photo by Omer Kuscu/Xinhua)
