Turkish Central Bank Rebuilds Reserves With $6 Billion Forex Boost

Markets stabilize as central bank resumes foreign currency purchases

The Central Bank of the Republic of Turkey (CBRT) recorded a $6 billion rise in gross foreign currency reserves last week, reversing a nearly two-month streak of steep losses triggered by political turmoil and heavy market interventions. The move signals a potential shift toward renewed stability in financial markets, according to calculations by Turkish bankers cited by Reuters.

From mid-March through early May, the CBRT reportedly sold approximately $57 billion in reserves to defend the Turkish lira, which plunged following the controversial detention of Istanbul Mayor Ekrem İmamoğlu. His arrest, seen as politically motivated by many observers, led to significant foreign capital flight, especially from government bonds. However, outflows have since slowed, and tentative inflows are now being observed.

Net reserves improve, lira steadies

Bankers estimate that net reserves increased by $4.6 billion last week, bringing the total to $37.4 billion. When swaps are excluded, net reserves rose $4.3 billion to $18.1 billion, suggesting that the CBRT’s efforts to replenish its FX buffers are gaining traction.

The Turkish lira, which has depreciated 8.7% year-to-date, reached a low of 42 per U.S. dollar in March but has since recovered to around 38.77. The currency’s rebound has been supported by aggressive monetary tightening and new macroprudential measures from the central bank.

Policy tightening and reserve accumulation

CBRT Governor Fatih Karahan confirmed last week that reserve depletion had halted and a rebuilding process had begun. In recent months, the bank implemented a cumulative 700 basis points of tightening, including a 350 basis point hike in March that brought the key interest rate to 49%.

Further, the central bank raised FX reserve requirement ratios by 200 basis points, a step estimated to withdraw $4.6 billion from the banking system and support liraization. The bank also increased the mandatory conversion rate of export earnings to Turkish lira from 25% to 35% until the end of July, and raised the FX conversion incentive from 2% to 3%.

Goldman Sachs noted these measures aim to both bolster reserves and reduce local demand for hard currency. However, the bank cautioned that political risk and global volatility still pose threats to sustained reserve growth. “A more stable solution to the sharp decline in reserves will have to come from a reduction of political risk domestically,” Goldman said in a research note.

Looking ahead: May 15 data and Moody’s watch

Official reserve data for the previous week is scheduled for release on May 15. Analysts will closely monitor the numbers to confirm whether the current upward trend continues.

Additionally, markets are awaiting Moody’s scheduled rating review in July. With Turkey currently rated B1—one notch below peers—investors are watching for signs of a possible upgrade, contingent on further macroeconomic and policy stabilization.

Bond and FX markets watching political landscape

While the Turkish lira has stabilized, analysts remain cautious. The central bank’s current policy stance and renewed FX purchases may help calm short-term market nerves, but long-term recovery hinges on easing political tensions and ensuring sustained credibility in monetary policy.

In the bond market, foreign investor interest remains subdued despite improving inflation data and attractive yields. Turkish eurobonds have shown slight gains, but confidence will depend on continued disinflation and political clarity.

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