In reversal, Turks shed FX holdings for second straight week

ANKARA: Turkish locals have trimmed their holdings of hard currencies for a second straight week to below $233 billion, edging further away from a record high and raising the prospect that a long-term dollarization trend may be turning around.

Turkey’s new central bank governor, Naci Agbal, has said a reversal of this trend - and signs of renewed faith in the lira currency - will be an important signal as the bank decides when to start rebuilding its own badly depleted FX reserves.

Aggressive interest rate hikes since November, when Agbal was appointed, have led to a 20% rally in the lira and some $20 billion in foreign investment inflows.

But Turks, stung by 15% inflation and a 50% drop in the currency in three years, have been more cautious. They added more than $75 billion in hard-currency holdings in the last two years, driving them to a record $236 billion last month. Yet in the first two-week drop since September, locals’ forex and precious metals holdings fell by $2.13 billion to $232.93 billion in the week to Feb. 5, according to central bank data on Thursday.—Reuters