Echoes of the İmamoğlu operation continue in the markets: Here are the details of the major crisis!

The judicial process initiated against Istanbul Metropolitan Municipality (İBB) Mayor Ekrem İmamoğlu and his colleagues has led to major fluctuations not only in the political arena but also in economic indicators. Following the operation, a record increase in foreign exchange demand was observed, while sharp declines were recorded in Central Bank reserves.

HISTORIC PEAK

According to data from the Central Bank of the Republic of Turkey (TCMB), the spot foreign exchange trading volume of Turkish banks reached 34.1 billion dollars on March 19, the first day of the operation, marking the highest level of all time. While the trading volume fell to 16.9 billion dollars on March 20, it rose again to 32.1 billion dollars on March 21.

Thus, the total spot foreign exchange trading volume between March 19-21 reached 83.2 billion dollars, recording an extraordinary increase. Considering that this volume was only 21.2 billion dollars in the March 14-18 period before the operation, it was observed that foreign exchange transactions increased approximately fourfold after the operation.

In addition, the interbank foreign exchange trading volume in the country also broke a record on March 19 with 18.1 billion dollars. This volume, which reached a total of 37.1 billion dollars in the three days following the operation, was only at the 3.7 billion dollar level in the three days before the operation. Thus, the volume increased tenfold.

The foreign exchange demand of domestic customers also increased significantly. While the foreign exchange trading volume between banks and domestic customers reached 13 billion dollars in the three days after the operation, this figure was at the 8.6 billion dollar level before the operation.

In particular, foreign exchange transactions with foreign banks and institutions reached a historic peak of 13.8 billion dollars on March 21. While the total three-day volume after the operation rose to 32.9 billion dollars, it was at the 8.9 billion dollar level in the three-day period before the operation.

MAJOR LOSS IN CENTRAL BANK RESERVES

Following the operation, the Central Bank's reserves experienced a serious erosion. The gross reserves of the TCMB decreased by 8 billion dollars last week, falling to 171.1 billion dollars.

Even more striking was the decline of the TCMB's net reserves by a historic 11.8 billion dollars to 62.1 billion dollars. A loss of 13.2 billion dollars was also experienced in net reserves excluding swaps, falling to 65.4 billion dollars.

A total decrease of 27.3 billion dollars was recorded in the TCMB's net foreign exchange position in the five business days following the operation.

EXIT SIGNAL FROM FOREIGN INVESTORS

Following the operation, the exit of foreign investors from Turkish markets accelerated. Last week, the exit of foreign investors through the swap channel was recorded at 3.3 billion dollars. However, there had been a total foreign swap inflow of 13.8 billion dollars in the 11-week period between December 27 and March 14.

Foreign investors also carried out a total exit of 883 million dollars from the stock and bond markets. Last week, foreign stock sales were recorded at 444 million dollars, and bond sales at 440 million dollars.

DOMESTIC INVESTORS TURNED TO FOREIGN CURRENCY

Domestic investors also turned to foreign currency due to financial uncertainty. Last week, the foreign currency deposit volume of domestic residents in banks showed a record increase of 5.9 billion dollars.

2.7 billion dollars of this increase originated from individual investors, and 3.2 billion dollars from companies.

MARKETS ARE FLUCTUATING

This extraordinary activity in financial markets following the operation against İBB Mayor Ekrem İmamoğlu shows that there are serious fluctuations in investor confidence.