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Turkey, UAE sign currency exchange deal to revive lira

Currency exchange

Turkey has signed two currency exchange terms with the UAE, which are to be implemented within a few days.

The Turkish Central Bank expected the exchange of currencies with the UAE at the end of this month, or the beginning of next month.

The exchange of currencies is expected to contribute to the recovery of the exchange rate of the Turkish lira. The currency experienced major turmoil recently, before its improvement.

Currency exchange

According to Reuters, citing Bloomberg HT, the governor of the Turkish Central Bank said that the bank may sign two currency exchange deals within two weeks. H did not disclose any further details.

Reuters reported that on Thursday talks between the Turkish Central Bank and its counterparts in Azerbaijan and the UAE, regarding a possible currency swap agreement, are nearing completion.

If the deal is completed, the UAE will become the second Gulf country to conclude such an agreement, after Qatar.

The Turkish lira recorded its strongest week ever, on Friday, as it rose 40% after government interventions in the market with support estimated at billions of dollars. The government also pledged to cover foreign exchange losses on some deposits in Turkish assets.

By Friday evening, the Turkish lira had improved by more than 40% to 10.55 against the US dollar.

Turkish President Recep Tayyip Erdogan said on Friday the government had eradicated the exchange rate bubble by taking steps this week to protect Turkish lira deposits against fluctuations.

On Monday, the Turkish lira fell to an all-time low of 18.4 against the dollar, after a months-long decline due to unconventional interest rate cuts and fears of an inflationary spiral.

Erdogan’s plan

Erdogan announced a plan by which the central bank and the treasury would compensate for losses on deposits converted into Turkish lira against foreign currencies, which led to the biggest rise ever in a day.

Last Tuesday, the Turkish Central Bank announced the addition of the UAE dirham to the system of foreign currencies in circulation. The bank published the announcement in the Official Gazette. This brings the number of foreign currencies in circulation to 22 currencies.

The most prominent currencies traded at the Central Bank of Turkey are: US dollar, Swiss franc, Japanese yen, Canadian dollar, Qatari riyal, Kuwaiti dinar, Russian ruble, and Saudi riyal.

This step comes after the improvement of relations between Abu Dhabi and Ankara, and the conclusion of a series of agreements between the two countries on the sidelines of the visit of Abu Dhabi Crown Prince Mohammed bin Zayed to the Turkish capital, Ankara, last November.

During the visit, it was announced that the UAE would invest $10 billion in Turkey, after signing 10 security, economic and technological agreements and memoranda of cooperation.

In the same month, Dubai Ports signed a partnership agreement with the Turkish Wealth Fund to discuss cooperation and explore investment opportunities in Turkey.

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