CBRT Deploys Gold Reserves to Defend Lira as Energy Shock Intensifies
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Türkiye’s central bank has stepped up intervention in FX markets by deploying gold reserves, with data indicating a total of 56 tons used in March through swaps and outright sales. The move highlights mounting pressure on the Turkish lira amid rising energy costs, foreign outflows, and renewed inflation risks linked to the Iran conflict.
56 Tons of Gold Used in Market Intervention
Recent data shared by economist Uğur Gürses reveal the scale of the Central Bank of the Republic of Türkiye’s (CBRT) intervention:
- 35 tons of gold used in swap transactions
- 21 tons sold outright
This brings the total gold deployed in March to 56 tons, underscoring a significant effort to stabilize the currency.
Gürses initially noted that the central bank appeared to have borrowed dollars against roughly 50 tons of gold ahead of the holiday period, with detailed data confirming the broader intervention.
Ugur Gurses
London-Based Gold Reserves in Focus
The findings align with earlier reports suggesting that the CBRT is leveraging overseas reserves.
According to market sources:
- The CBRT is conducting gold-for-FX swap operations in London
- A portion of Türkiye’s gold reserves is held abroad
Estimates indicate:
- Total gold reserves: approximately $135 billion
- Around $30 billion held at the Bank of England
These offshore reserves allow the central bank to intervene in FX markets more efficiently.
Energy Shock Driving Policy Response
The intervention comes amid rising economic pressures linked to the Iran conflict:
- Oil prices surged from around $70 to above $100 per barrel
- Energy import costs have increased sharply
As an energy-importing economy, Türkiye faces:
- Higher inflation risks
- Increased pressure on external balances
S&P Raises Türkiye Inflation Forecast as Energy Shock Risks Intensify
Additional FX Liquidity Measures
Beyond gold operations, reports suggest the CBRT has also:
- Sold approximately $16 billion in US Treasury holdings
This indicates a broader effort to generate FX liquidity and support the lira.
Foreign Outflows Add to Pressure
Market stress has been compounded by foreign investor behavior:
- Sharp outflows from Turkish government bonds
- Continued selling in equities
These developments have increased demand for foreign currency, intensifying pressure on the exchange rate.
Domestic FX Demand Rising
On the domestic side, signs of increased dollarization are emerging:
- FX demand in the local market is rising
- Currency exchange shops are reportedly quoting higher rates than interbank levels
This divergence signals growing retail demand for foreign currency.
Monetary Tightening Not Fully Effective
The CBRT has already taken steps to tighten financial conditions:
- Reduced funding at the policy rate
- Effective funding costs pushed toward 40%
However, markets expect:
➡️ Additional rate hikes of at least 100 basis points in the coming period
Lira Remains Under Pressure
Despite aggressive intervention measures:
- USD/TRY continues to trade around 44.35
This suggests that:
➡️ Reserve-based interventions alone are not sufficient to ease pressure
Source: Bloomberg, KARAR, Uğur Gürses
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