Turkey’s Central Bank Suspends Daily Forex Purchase Auctions

TheCentral Bank of Turkeyannounced that it suspended its daily forex purchase auctions as of May 16. In a statement, the central bank said the decision was due to global liquidity conditions, fluctuations in currency rates and a decline in the supply of foreign currency in the country recently. The Central Bank had resumed its forex purchase auctions on Dec. 22, 2004, and it has been buying between US$30 million and US$60 million through daily auctions, occasionally intervening in the market directly in order to prevent excess volatility.

On a related note,Durmus Yilmaz, governor of the Central Bank, commented that he did not believe the volatility in the forex market was due to changes in economic fundamentals. Recent debates regarding the presidential elections and early general elections had an adverse impact on the markets, Durmus said, though he also indicated that the recent volatility in exchange rates is temporary, and that the Central Bank will continue to implement its floating exchange policy. Durmus also noted that the Central Bank intervened in the forex market with two purposes: to prevent excessive volatility and to increase the bank’s forex reserves. There will not be any change in the bank’s policies in the short and medium term, he added.