Turks with dollars to sell get a better deal selling their greenbacks at Istanbul’s centuries-old Grand Bazaar gold market as officials keep the currency rates offered by banks on a tighter rein.
(Bloomberg) — Turks with dollars to sell get a better deal selling their greenbacks at Istanbul’s centuries-old Grand Bazaar gold market as officials keep the currency rates offered by banks on a tighter rein.
In the world’s oldest covered market, the US dollar-lira pair is trading at its highest premium to interbank exchange rates in nine months, according to data compiled by Bloomberg.
Turks currently get about 2% more for their dollars there than they would by exchanging the US currency at their bank. The central bank has been tightening its grip over the official foreign-exchange market in the run-up to elections in May, while the exchange booths at the Bazaar don’t face the same level of pressure.
Meanwhile, the lira’s depreciation has recently gathered pace, with forwards signaling further weakness after the vote as traders anticipate a challenging transition phase, regardless of who the winner is.
“The widening spreads between the selling and buying prices on the FX and the pressure from regulations have likely sent people to the Grand Bazaar where they can trade cash easier amid increased demand for cash dollars ahead of elections,” said Enver Erkan, chief economist at Dinamik Yatirim, an Istanbul brokerage.
The central bank is intervening more actively to scrutinize larger trades to ensure they meet with its approval, Bloomberg News reported last week, citing several traders who spoke on condition of anonymity.
Meanwhile, it continues to push policies to boost the share of lira deposits in the banking system to diversify savings away from foreign currencies such as the dollar.
“The tightly-knit liraization steps are leading to artificial pricing in the lira and leading to varying exchange rates for the currency,” said Erkan.
The lira fell about 0.2% during today’s trading in Istanbul and has weakened 2.8% so far this year.
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