The Central Bank of Turkey (CBRT)’s started to hold foreign exchange buying auctions, on May 6, 2003. Daily auctions that had been announced as $20 million in May were increased to $30 million in June, to $40 million at the start of July, and to $50 million on July 17, 2003, with the prospects of the progressively increasing trend in excess foreign exchange supply due to seasonal factors.
Through foreign exchange buying auctions, the CBRT bought three billion dollars in total between May and August 2003. Moreover, $2.08 billion in total was purchased by means of four outright buying interventions aiming at preventing excessive volatility in exchange rates. Hence, $5.093 billion was purchased through foreign exchange buying auctions and foreign exchange outright buying interventions during the same period.
Although it is predicted that the excess foreign exchange supply observed in the May-August period will continue also in September, it has been decided to determine the total amount of daily foreign exchange buying through the auctions using a more flexible method, considering the volatility in excess supply that might occur due to seasonal factors. Accordingly, the total amount of daily foreign exchange buying will be $40 million, and a selling option based on the average price realized in the auction will be granted exclusively to those institutions that are eligible to sell foreign exchange in the auction.
The maximum amount of optional selling that an institution can utilize will be limited to 50 percent of what it has sold. Therefore, the maximum daily auction can reach $60 million, with the use of the optional selling of $20 million. On the other hand, in the event that there is no bid, or no optional selling, there will be no foreign exchange buying in the subsequent auctions in order to compensate the unsold amounts.
The CBRT will continue to conduct Turkish Lira buying auctions in September 2003 with a standard four-week maturity that was initiated in April 2002 as a supplement to its existing instruments in the Interbank Money Market with the aim of enhancing the effectiveness of its efforts to sterilize the excess Turkish lira liquidity in the system. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
