Turkish central bank raises forex reserve requirement ratios to support lira

Turkey’s central bank announced on Friday that it increased its reserve requirement ratios on foreign currency deposits and participation funds by 100 basis points.

The bank said in a statement on its web-site that the revised ratios would result in the withdrawal of approximately $2.1 billion of forex liquidity from the market.

The bank previously increased the same ratios by 100 basis points on Aug. 5. 

The latest move aiming to make holding foreign currency more expensive came after the bank’s latest figures showed on Thursday that foreign currency deposits and funds, including precious metals, of Turkish local individuals and corporates rose to a record high of $191.43 billion as of Sept. 13.

Turkey has taken unorthodox measures to lower demand for foreign currency and to increase the attractiveness of the Turkish lira since a currency crisis in August 2018 wiped nearly 30 percent off the lira’s value against the dollar by the year’s end, rocketing inflation and ushering in a recession.