Turkey’s Central Bank protects liquidity with forex adjustments
The Central Bank of Turkey has made a series of foreign exchange adjustments in order to meet an additional liquidity need that might emerge in the markets as a result of the US-led military campaign against Iraq. Currently, the amount of liquidity in the Turkish lira money markets is adequate to meet the liquidity needs of the financial system.
The foreign exchange balance, and the level of foreign exchange liquidity in the banking system have been strengthened as a result of the Central Bank’s strict implementation of the floating exchange-rate regime that was initiated in February 2001, and due to the fact that banks have attached great importance to their exchange-rate risk management.
Banks will be provided with one-week maturity foreign exchange deposit facility within their limit of borrowing in the Foreign Exchange Deposit Market at the Central Bank. The interest rate to be applied to the said deposits has been cut down to eight percent from 12 percent.
All necessary preparations have been made and the amount of foreign currency banknotes held at the branches of the Central Bank has been increased to meet demand for foreign currency banknotes that might emerge in this period. In this context, the demand for foreign currency banknotes against foreign exchange of all the institutions authorized to operate in the Foreign Exchange and Foreign Banknotes Markets with the Central Bank will be met.
The interest rate charged for funding the banks without any limit via the Late Liquidity Window facility at the Interbank Money Market operating under the Central Bank has been decreased by 5 points to 56 percent. On the other hand, when necessary, the Central Bank will also provide O/N funding at the Istanbul Stock Exchange Repurchase Market at 51 percent.
The Central Bank will closely monitor the excessive volatility that might occur in exchange rates due to liquidity shortage in the market, or speculative actions and as before, will directly intervene in the event of an excessive volatility that might occur in both directions. — (menareport.com)
© 2003 Mena Report (www.menareport.com)