Sebnem Kalemli Ozcan (@skalemliozcan), a Turkish professor of economy at Brown University in the US, on August 26 shared a photo on X that showed Turkey’s central bank governor Fatih Karahan posing in a cowboy hat.

A little later on, Ozcan deleted the photo.

Right now, given the continuing precarious state of Turkey’s economy, the Erdogan administration could do without any suggestion that cowboys are in charge of the recovery plan.

Screenshot: Ozcan deleted her first tweet (left).

Karahan was in the US to attend the annual Jackson Hole symposium held by the Kansas Fed. On August 27, he met with his American counterpart Jerome Powell.

Back in Ankara, the Turkish Exporters Assembly (TIM, @turkihracat) on August 27 announced in a tweet that Turkey’s president, Recep Tayyip Erdogan, received Mustafa Gultepe, head of TIM.

Photo: Gultepe (left) met with Erdogan on Tuesday.

Gultepe informed Erdogan about “the current problems in export and the expectations of the export family”, TIM said.

Steam has been seen coming from exporters' ears.

Back on August 6, Gultepe urged the central bankers to shift the USD/TRY rate to 37 lira.

Between March and July, the Erdogan administration applied its usual straight-line USD/TRY rate policy. It drew a line around the 32-level this time around.

Come August, the 33s were seen as the new USD/TRY level.

On August 19, Bloomberg reported that government-run banks had sold $500mn during the day. Turkey’s central bank utilises such sales to intervene in the currency market. And it is a tradition that is kept alive by the current “orthodox” economic management officials appointed by Erdogan as he shamelessly U-turned on monetary policy following his re-election last year.

On August 20, bne IntelliNews noted: “The possibility of insisting on keeping the USD/TRY pair flat, something that was seen prior to the appointment of the new economic management, is not visible at this point in time.”

On August 21, local media reports suggested that the USD/TRY rate stood at 33.88 in the interbank market while the free market prices at the Grand Bazaar in Istanbul stood at 34.10. And since that day, the USD/TRY rates have been set in the 34s.

On August 28, Bloomberg reported that the USD/TRY experienced a limited flash crash, jumping as far as 34.4898 before returning back to 34.04.

Since the local elections that took place on March 31, the central bank has managed to build up its reserves thanks to portfolio inflows (mainly carry trade), declines in FX deposits at local banks and increases in FX loans.

With July, the portfolio inflows slowed sharply and the central bank introduced caps on FX loan growth (due to tightening concerns).

Carry Trade Flows to Turkey (estimate)
million USD	Turkish Banks Off-Balance Sheet FX Position	Turkish Central Bank's Total Swap Stock with Local Banks	Swaps Converted to Deposits	Lira-settled FX Frowards	Turkish Central Bank's Net FX Derivatives Stock with Local Banks	Turkish Banks' Swap Stock with Foreign Counterparts (estimate)	Carry Trade Flows (estimate)	Cumulative Flow
Mar 29, 2024	55,781	57,898	433	4,279	61,744	-5,963
Apr 5, 2024	53,366	53,569	433	4,269	57,405	-4,039	1,924	1,924
Apr 12, 2024	53,712	52,336	433	4,269	56,172	-2,460	1,579	3,503
Apr 19, 2024	47,020	44,495	413	3,902	47,984	-964	1,497	5,000
Apr 26, 2024	43,446	39,586	363	3,384	42,607	839	1,803	6,803
May 3, 2024	43,912	36,813	243	2,615	39,185	4,727	3,888	10,690
May 10, 2024	43,112	31,398	243	2,142	33,297	9,815	5,088	15,778
May 17, 2024	39,292	25,355	243	1,939	27,051	12,241	2,426	18,204
May 24, 2024	36,533	22,264	243	1,746	23,767	12,766	525	18,729
May 31, 2024	35,224	20,811	243	592	21,160	14,064	1,298	20,027
Jun 7, 2024	33,213	18,300	163	349	18,486	14,727	664	20,690
Jun 14, 2024	27,881	12,496	103	141	12,534	15,347	619	21,310
Jun 21, 2024	25,589	9,093	40	5	9,058	16,531	1,185	22,495
Jun 28, 2024	21,134	4,719	0	0	4,719	16,415	-116	22,378
Jul 5, 2024	20,798	2,322	0	0	2,322	18,476	2,061	24,439
Jul 12, 2024	20,813	2,351	0	0	2,351	18,462	-14	24,425
Jul 19, 2024	20,842	2,051	0	0	2,051	18,791	329	24,754
Jul 26, 2024	18,656	55	0	0	55	18,601	-190	24,564
Aug 2, 2024	19,109	-180	0	0	-180	19,289	688	25,252
Aug 9, 2024	17,925	0	0	0	0	17,925	-1,364	23,888
Aug 16, 2024	19,015	-225	0	0	-225	19,240	1,315	25,203

Table: Carry trade flows to Turkey.

Weekly net flows to Turkey's lira papers
million USD	Government papers	Cumulative since end-March	Stocks		Total cumulative
Mar 22, 2024	-104		429
Mar 29, 2024	112		267
Apr 5, 2024	86	86	363	363	449
Apr 12, 2024	38	125	160	523	647
Apr 19, 2024	115	240	-143	380	619
Apr 26, 2024	604	843	-155	225	1,068
May 3, 2024	761	1,604	311	536	2,140
May 10, 2024	2,833	4,437	85	620	5,057
May 17, 2024	1,339	5,776	-233	388	6,163
May 24, 2024	1,570	7,346	-28	360	7,706
May 31, 2024	94	7,440	-529	-169	7,271
Jun 7, 2024	541	7,981	-543	-712	7,269
Jun 14, 2024	792	8,773	-439	-1,151	7,622
Jun 21, 2024	34	8,807	-158	-1,309	7,498
Jun 28, 2024	-679	8,128	-228	-1,537	6,591
Jul 5, 2024	1,418	9,546	156	-1,381	8,165
Jul 12, 2024	895	10,441	-58	-1,438	9,003
Jul 19, 2024	-700	9,741	124	-1,314	8,427
Jul 26, 2024	1,361	11,102	-129	-1,443	9,659
Aug 2, 2024	-162	10,939	-169	-1,612	9,328
Aug 9, 2024	18	10,957	-324	-1,935	9,022
Aug 16, 2024	1,404	12,361	-298	-2,233	10,128

Table: Net flows into Turkey’s domestic government paper and equities.

Since July 5, FX deposits have been rising again. They have moved up by around $11bn.

FX loans and deposits at Turkish banks
USDmn	FX loans	Weekly change	Cumulative	FX deposits	Weekly change	Cumulative
Mar 29, 2024	134,675			210,403
Apr 5, 2024	136,474	1,798	1,798	206,858	-3,545	-3,545
Apr 9, 2024	136,362	-112	1,687	207,813	954	-2,591
Apr 19, 2024	135,974	-388	1,299	208,010	198	-2,393
Apr 26, 2024	140,714	4,740	6,039	205,381	-2,629	-5,022
May 3, 2024	141,758	1,044	7,083	201,932	-3,449	-8,471
May 10, 2024	143,065	1,307	8,390	198,647	-3,286	-11,757
May 17, 2024	144,587	1,522	9,912	197,656	-990	-12,747
May 24, 2024	149,326	4,739	14,651	196,054	-1,603	-14,349
May 31, 2024	150,233	907	15,558	192,793	-3,261	-17,610
Jun 7, 2024	150,778	545	16,103	190,975	-1,818	-19,428
Jun 14, 2024	150,608	-170	15,933	188,159	-2,816	-22,244
Jun 21, 2024	150,605	-3	15,929	190,742	2,583	-19,661
Jun 28, 2024	151,399	795	16,724	188,742	-1,999	-21,661
Jul 5, 2024	153,302	1,902	18,627	187,866	-876	-22,537
Jul 12, 2024	154,375	1,073	19,699	189,278	1,412	-21,125
Jul 19, 2024	154,614	240	19,939	190,865	1,586	-19,538
Jul 26, 2024	155,315	701	20,640	190,908	44	-19,495
Aug 2, 2024	156,640	1,325	21,965	191,594	686	-18,809
Aug 9, 2024	157,400	760	22,725	194,229	2,634	-16,175
Aug 16, 2024	158,503	1,103	23,828	195,477	1,249	-14,926
Aug 23, 2024	160,590	2,087	25,915	199,338	3,861	-11,065

Table: FX loans and deposits at Turkish banks.

As things stand, it can be said that the central bank’s reserve quality is no longer negative. However, since end-July, the central bank may have burnt through about $8bn (See "Net USDmn" column in the table below).

Turkish central bank's net FX position
	A.1_FOREIGN ASSETS (Thousand TRY)	P.1_TOTAL FOREIGN LIABILITIES (Thousand TRY)	Net (A.1-P.1)	USD/TRY Buying	Net USDmn	2. Aggregate short and long positions in forwards and futures in foreign currencies	3. Other (specify)	Net (minus) swaps	Cumulative change (USD bn)
Mar 29, 2024	4,057,007,074	3,834,312,295	222,694,779	32.26	6,903	-76,653	-4,338	-74,088
Apr 30, 2024	4,107,363,595	3,743,279,647	364,083,948	32.34	11,258	-57,559	-5,986	-52,287	22
May 17, 2024	4,540,619,192	3,721,838,317	818,780,875	32.16	25,460	-43,568	-5,082	-23,190	51
May 24, 2024	4,639,784,615	3,574,706,968	1,065,077,647	32.14	33,139	-40,745	-4,729	-12,335	62
May 30, 2024	4,675,489,675	3,476,230,575	1,199,259,100	32.25	37,188	-39,291	-4,680	-6,783	67
Jun 28, 2024	4,762,091,401	3,700,003,784	1,062,087,617	32.83	32,355	-24,565	-3,264	4,526	79
Jul 19, 2024	5,152,701,184	3,816,209,032	1,336,492,152	33.00	40,495	-23,276	-1,966	15,253	89
Jul 31, 2024	4,967,794,204	3,565,009,078	1,402,785,126	33.08	42,401	-23,112	0	19,289	93
Aug 2, 2024	5,041,545,847	3,594,239,880	1,447,305,967	33.08	43,757	-22,946	0	20,811	95
Aug 16, 2024	5,201,567,100	3,817,003,912	1,384,563,188	33.61	41,194	-22,087	0	19,107	93
Aug 27, 2024	5,108,734,680	3,891,860,982	1,216,873,698	33.96	35,835

Table: Turkish central bank’s net FX position.

Around $5-6bn looks to have been burnt through in the period since August 16 alone.

In May, during the height of the carry trade inflows, bne IntelliNews noted: “In any case, 'end of summer, September, October, US elections' may provide some ideas about the maturity.”

It may be time to move on.