New move from the Central Bank against exchange rate fluctuations!

The Central Bank of the Republic of Türkiye (TCMB) has shared a new informational video regarding "Turkish Lira-Settled Forward Foreign Exchange Transactions" (known by the English acronym NDF).

In the video, it was stated that with this step, the TCMB aims to bring fluctuations in exchange rates under control, ensure that foreign exchange markets operate more effectively, and contribute to the real sector's ability to better manage exchange rate risk.

This practice was implemented following the rapidly rising political tension after the arrest of Istanbul Metropolitan Municipality (İBB) Mayor Ekrem İmamoğlu and the sharp fluctuations in foreign exchange markets associated with it.

The Central Bank launched Turkish Lira-settled forward foreign exchange sales as of March 20, 2025, in order to balance liquidity in the markets, limit exchange rate volatility, and ensure the stability of the foreign exchange market.

WHAT IS NDF?

NDF (Non-Deliverable Forward) transactions, which the TCMB has put into effect, are forward contracts used to manage foreign exchange rate expectations in the market. In this system, physical delivery of foreign currency does not take place; settlement is provided on a TL basis at the end of the maturity period.

According to economists, such financial instruments can reduce speculative pressure on the TL by providing the Central Bank with the opportunity to intervene in the markets without directly spending foreign exchange reserves.