Central Bank’s Gross FX Reserves Fall for 6th Consecutive Week

There remains a lack of clarity over the drivers for the pullback in Turkish FX reserves since the beginning of the year - CBRT data shows gross central bank FX reserves fell for a sixth consecutive week in the latest data, down $2.5bln last week to a total of $82.5bln. Year-to-date, gross FX reserves have fallen around $10.2bln. Gold reserves are unchanged on the year.

• Total foreign exchange reserves sharply accumulated following the appointment of Erdogan's new economic management team last year, rising from a low of $56.5bln at the end of May to a peak of $97.6bln in December. However various sources are citing differing reasons for the partial reversal since.
• According to Reuters’ trading sources, last week’s significant decrease in reserves is attributable at least in part due to energy import payments. Meanwhile, Bloomberg write that the erosion in Turkey’s foreign currency reserves was triggered mostly by the central bank’s payments under the KKM mechanism.
• Either way, a persistent draw in reserves will keep pressure on the TRY, and the (generally) orderly pace of depreciation. Particular focus could turn to the government's intentions on KKM and any potential acceleration of the phase-out of the FX-linked savings scheme.