Central Bank has no exchange rate target: Erkan

ANKARA

The Central Bank has no exchange rate target and does not engage in transactions to keep the rates at certain levels, Governor Hafize Gaye Erkan has said.

The bank does not sell or buy foreign currencies to determine the direction or the level of the exchange rates, Erkan told lawmakers during a presentation she made earlier this week at parliament’s budget and planning commission.

The bank only sometimes provides liquidity to the FX market, which is a common practice employed by all central banks in the world, the governor said. “If we had any intention to keep the exchange rates at a certain level, the exchange rate increases, which have been observed since my appointment, would not have occurred.”

Erkan took the helm at the Central Bank in June this year after the May elections.

The Central Bank stepped into the market when there were speculative attacks on the currency, and the bank’s transactions have been minimal and aimed at preventing excessive volatility in the currency market, Erkan added.

In response to questions from lawmakers sugging that the Central Bank in the past burned as much as $128 billion through back-door currency market operations, the governor said there was a protocol between the Treasury and the Central Bank and that all transactions were in line with the regulations.

“There is a wrong perception that as if the bank’s reserves had been channeled to certain institutions and individuals in a secretive way. The math is here.”

At the end of the day, the central banks keep reserves to intervene to prevent exchange rate fluctuations, she said, adding that the size of the interventions and their timing are debatable.

The data provided on the Central Bank’s website clearly show when and how the bank’s reserves are used and how the FX liquidity level changes, Erkan said.

“We see that our monetary tightening and the strong reserve accumulation support exchange rate stability,” the governor added.