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Turkey readies gold to fight Lira's Iran war fears
24 Mar
Summary
- Central bank may use $30 billion in gold reserves held in London.
- Turkey's inflation was 31.5% in February, one of the world's highest.
- Policymakers are struggling with rising oil prices and import costs.
Turkey's central bank is reportedly expanding its currency defense strategies, potentially utilizing its vast gold reserves to counter lira volatility influenced by the Iran conflict. Discussions have included the possibility of gold-for-foreign currency swap transactions in the London market.
As of early March, Turkey held approximately $135 billion in gold reserves. JPMorgan economists estimate about $30 billion of these reserves are held at the Bank of England, available for foreign exchange intervention without logistical hurdles.
The country faces significant risks from prolonged conflict, particularly due to its reliance on imported oil and gas. Inflation stood at 31.5% in February, and policymakers are grappling with sustaining the lira's stability amidst rising import costs.
Turkish officials have previously tightened liquidity and used state-run banks for currency market interventions. The central bank has also reduced its holdings of foreign currency bonds, including US Treasuries, with holdings dropping significantly since 2015.
