Keep in Mind that Floating Exchange Rate Regime is Not in Place…
When the performance of Turkish lira against the US Dollar is compared to the performance against other developing country currencies it can clearly be seen that a “managed float regime” is applied rather than a floating one.
For example, the Brazilian Real seems to have appreciated in the last year, hitting the highest level of 5.49 and the lowest level of 4.72. Similarly gaining value against the US dollar, the Mexican Peso showed a healthy volatility. by approaching 20, then dropping to 16.70 and today it is traded for approximately 17.50. Even though the Czech Koruna fluctuated sharply against the Dollar, it has appreciated over the past year. Its journey started with 23 and then fell to 20. Nowadays it is sold for 22. Polish Zloty also maintained a strong stance against the Dollar, following a downward trend from 4.5 to 4.15 today. The Hungarian Forint also increased in value in the last year despite political troubles in the country.
Although the performance of the South African Rand has been weak so far against the Dollar compared to the currencies mentioned above, it seems to have declined from 20 in the first months of 2023 to 18 today.
The Russian Rouble has naturally depreciated as the currency of a country that is at war and subject to sanctions. The Dollar to Rouble exchange rate, which was around 60 a year ago, hit 100 at one point. However, it has calmed down lately and dropped below 90.
TRY, on the other hand, has been constantly losing in value without any ups and downs. The price of Dollar, which was TRY 18 a year ago, has gradually become TRY 29. According to the duo’s exchange rate chart, the value of Turkish lira against dollar has been on a descending trend since 2021. Lira’s journey started exactly at 7.5 and climbed up to 29 in no time. And throughout this period, the government has intervened in the dollar’s exchange rate several times, directly or indirectly. But have their attempts been successful? Let’s check out the 5-year performance.
Dollar/Real: 3.90 – 4.90
Dollar/Peso: 20.40 – 17.52
Dollar/Koruna: 22.80 – 23.09
Dollar/Zloty: 3.80 – 4.15
Dollar/Forint: 285 – 348
Dollar/Rouble: 66 – 88
Dollar/Rand: 14 -19
Dollar/Turkish lira: 5.3 – 28.7
This evidently shows us that Central Bank officials have not been able to restore the stability of the TRY, there were no fluctuations because the methods they applied were nothing to do with the free market economy, and they were trying to slow down the inevitable instead of facing a sharp rise. In short, The CBRT did not have the right approach, neither yesterday nor today. The only period of time when Turkish lira both appreciated and remained stable was from November 2020 to March 2021, during the office of Mr. Ağbal. If other CBRT chairs had believed in the free market system and intervened in interest rates in the right way at the right time, this would not have happened.
