$30 billion burned in 3 weeks! Turkey's foreign reserves near the red line, concerns rise over central bank dumping gold
Turkey’s foreign exchange reserves have plummeted since the outbreak of the Iran conflict. Fund managers and economists say that this has raised questions about Turkey’s exchange rate policy and led to speculation that the Turkish central bank may have to tap into its gold reserves to support the lira.
Over the past three weeks, rapid capital outflows have prompted the Turkish central bank to spend about $30 billion to keep the lira stable—a sum almost matching the amount spent during the financial panic triggered by the arrest of Istanbul’s Mayor İmamoğlu last year.
Kieran Curtis, Emerging Markets Fund Manager at abrdn, said: “At the current pace of reserve depletion, the central bank’s current foreign exchange policy cannot last much longer unless they sell some of their gold reserves.”
As a NATO member, Turkey shares a 550-kilometer border with Iran and is currently trying to mediate to end the conflict. Since the vast majority of its energy is imported, Turkey appears particularly vulnerable amid this crisis.
Last week, Turkish Finance Minister Mehmet Şimşek admitted that Turkey “cannot” remain unaffected by the conflict and expressed his greatest concern about the current account deficit, a weakness that could severely impact the lira.
According to calculations by Bürümcekçi Research & Consulting based on official data, in the three weeks up to March 19, the Turkish central bank sold $26 billion in foreign currency, causing net reserves excluding swaps to fall to $43.4 billion. Other independent economists estimate that since the outbreak of the conflict, net reserves have declined by $34 billion.
However, according to data from J.P. Morgan, the Turkish central bank still possesses over $100 billion worth of gold, with about $30 billion stored at the Bank of England. This gold can be used to intervene in the foreign exchange market “without logistic constraints.”
Bloomberg reported on Tuesday that to replenish its foreign exchange reserves, the Turkish central bank is considering using gold swaps. A gold swap usually means temporarily exchanging gold for foreign exchange, with an agreement to reverse the transaction and retrieve the gold later.
The Turkish central bank did not immediately respond to requests for comment.
Over the past three years, under the leadership of Şimşek, a former senior economist at Merrill Lynch, and central bank governor Karahan, a former economist at the New York Fed, Turkey has rebuilt its economic credibility.
Their ultra-high interest rates and strong exchange rate policies helped reduce Turkey’s inflation rate from the 85% peak at the end of 2022 to about 30% in January this year, and replenished previously depleted foreign exchange reserves—thanks in part to Turkey’s current high interest rate of 37%, which has attracted a sizable amount of foreign investment.
However, soaring energy costs are spreading throughout Turkey’s economy, which could undermine its tight monetary policy—measures designed to suppress inflation, stabilize the lira, and maintain the confidence of foreign investors and domestic savers.
Since the conflict erupted on February 28, the price of Brent crude has risen more than $30 per barrel and hovered around $102 on Tuesday. Last month, Turkey’s inflation rate climbed to 31.5%, among the highest in the world. Meanwhile, Turkey’s annualized current account deficit also increased to nearly $33 billion.
Timothy Ash, Senior Sovereign Strategist at RBC BlueBay Asset Management, commented: “Turkey has held up really well—exceeding many people’s expectations.”
Ash added: “However, the longer the crisis lasts and energy prices stay high, the more obvious the outcome: Turkey will be forced to let the lira weaken and raise interest rates. But if that happens, the entire world will suffer.”
So far, Turkey’s central bank has refrained from raising its main policy rate, in stark contrast to March last year. At that time, amid financial turmoil following the arrest of President Erdoğan’s biggest political rival, İmamoğlu, the central bank hiked rates by 3.5 percentage points to 46%, and pumped as much as $50 billion into the lira—causing net reserves to plunge to just $10 billion.
Since then, Turkey has re-established its foreign exchange reserve buffer. Nevertheless, if the economy weakens further, and a wave of refugees as large as the nearly four million Syrians that previously fled to Turkey arrives from Iran, this would further complicate President Erdoğan’s political prospects in the next election—which must be held by May 2028.
Polls show the ruling Justice and Development Party, led by Erdoğan, currently trails the main opposition Republican People’s Party, to which İmamoğlu belongs.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Chipmaker earnings growth cools to 136% as AI boom lifts S&P 500
Updated: Delta Air Lines warns that as fuel prices hit profits, airline capacity will tighten further
Delta Airlines lowers its annual profit forecast due to an expected increase in fuel costs to $6 billion. The CEO stated that ticket prices have risen by about 20% this year, with limited passenger resistance. Analysts warn that maintaining high ticket prices in 2027 is critical for improving profitability. The article includes comments from the earnings call and analyst remarks. Rajesh Kumar Singh/Shivansh Tiwary, Reuters Chicago, October 9 - Delta Airlines (DAL.N) said on Friday that, despite strong travel demand and rising ticket prices, soaring fuel costs have forced it to cut its 2026 profit expectations by nearly a quarter. So, the airline industry may need to further limit flight growth next year to protect profitability. This warning highlights the increasingly tough challenges faced by U.S. airlines. While strong demand and restricted seat growth have allowed airlines to significantly raise ticket prices and offset higher fuel costs, aggressively increasing flights to capture more demand may intensify competition, making it harder to maintain high fares and protect profits. Based in Atlanta, Delta now expects its annual fuel expenditure to increase by about $6 billion compared to last year—about $2 billion higher than its July forecast—due to the Iran war (link) causing global jet fuel prices to spike. Airlines worldwide are preparing for a prolonged fuel shock. Michael O’Leary, CEO of Ryanair Group RYA.I, said Thursday that high jet fuel prices could persist for another 12-18 months (link), adding more pressure on airlines to raise fares and control costs. https://www.reuters.com/graphics/AUTOMATED-20261008/A4A-JET-FUEL-DAILY-1Y/xmpjwjnmbvr/chart.png “In a high-cost environment, you can’t simply grow your way out,” Delta CEO Ed Bastian said on the earnings call. He noted that the industry has already taken steps to restrict capacity, but more measures will be needed next year to improve profitability. Bastian said Delta raised ticket prices about 20% this year, and passenger resistance has been limited. He is confident that even if fuel costs eventually drop, the high fares can still be maintained. Delta lowered its adjusted annual earnings per share forecast from the July prediction of $6.50-$7.50 to $5.10-$5.60. According to LSEG data, the midpoint of the new range is below analysts’ average expectation of $5.46. Third-quarter adjusted earnings per share were $1.72, four cents below analysts’ average forecast. In midday trading, shares of Delta dropped 1.7%, United Airlines UAL.O fell 1.4%, and both American Airlines AAL.O and Southwest Airlines LUV.N were down about 1%. Delta partly shields itself from rising fuel costs by owning a refinery outside Philadelphia (link), which is expected to generate over $700 million in profits this year. Even with this buffer, the airline expects its fourth-quarter fuel price to rise from $3.61 per gallon in Q3 to $4.25 per gallon. Delta forecasts adjusted fourth-quarter earnings per share to be between $1.15-$1.65, with the $1.40 midpoint roughly matching analysts’ average expectation of $1.39. Fare increases Government data shows that in the first eight months of 2026, U.S. airlines spent $42.9 billion on fuel, an increase of $13.2 billion compared to the same period last year despite slightly reduced consumption. According to the U.S. Bureau of Labor Statistics, strong demand and limited seat growth pushed average U.S. airline ticket prices up by about 25% year-on-year between April and August. https://www.reuters.com/graphics/USA-AIRLINES/FUEL/lbpgdnbzwvq/chart.png Analysts at Melius Research said that despite surging fuel costs, Delta’s ability to raise fares helps keep second-half profits roughly stable. Still, they warn that the company’s profit margin has struggled to improve over the years. “It is critical for margin improvement to maintain or raise fares in 2027,” they wrote in their research report. With industry capacity growth expected to accelerate in Q4, this challenge will likely become even tougher. Deutsche Bank analysts expect the proportion of fuel costs recouped through revenue measures to fall in Q4 and predict full recovery won’t happen until early 2027. Bastian noted that low industry returns are another reason for limiting capacity growth. He said Delta will be cautious with its 2027 capacity plan until the fuel price outlook becomes clearer. He added that international routes may account for a larger share of Delta’s capacity expansion compared to domestic routes. Currently, Delta says its premium cabins and corporate travel business remain strong, and its economy cabin business is gradually improving. With Q4 ticket bookings already exceeding 60%, Delta expects revenue to increase about 20% year-on-year, despite limited capacity growth. Executives said early booking trends for Q1 2027 are also encouraging. (For the convenience of non-native English speakers, Reuters automatically translates its reports into several
AI and Quantum: Trump's $6 Billion Plan Could Also Impact Bitcoin
Wall Street giants to release financial reports next week: stock trading revenue expected to approach $19 billion, "everyone is a winner" may be a thing of the past
According to analyst expectations compiled by Bloomberg, the combined equity trading revenue of the five major U.S. banks in the third quarter will approach $19 billion, but fixed income trading revenue is expected to drop to its lowest point of the year, and M&A activity has also cooled. Meanwhile, AI-driven cash optimization tools may lead to deposit outflows, sparking concerns about bank stocks in the market. Analysts believe that while the profit performance of each bank may further diverge, market concerns about the impact of AI may be overblown.
Crypto prices
More
