Real effective exchange rate index indicates limited recovery

real-effective-exchange-rate-index-indicates-limited-recovery-06072004

Real effective exchange rate index indicates limited recovery

Central Bank of the Republic of Turkey (CBRT) announced June CPI-based real effective exchange rate index at 69.32 level. The real effective exchange rate was announced as 68.65 in May. The real effective exchange rate, which declined during the March - May period with the pandemic conditions, saw a partial recovery in June.

 

According to the Central Bank's definition of nominal effective exchange rate, the weighted average value of TRY, against the countries has a significant share in Turkey's foreign trade based on a basket of the currencies. Weights are determined using bilateral trade flows. The real effective exchange rate is obtained by adjusting the relative price effects in the nominal effective exchange rate. In other words, the rise of the real effective exchange rate shows that TRY gains value and the decline of the index indicates depreciation. The appreciation of TRY shows that Turkish goods are becoming more expensive in terms of exports, and otherwise becoming cheaper. There are overvalued and undervalued thresholds in terms of index value.

 

In September 2018, with the exchange rate fluctuation in the extraordinary market conditions, where the exchange rate volatility increased, the real effective exchange rate index reached 62.51 in the related period, and then it remained above 70, except for the May 2019 period when the exchange rate volatility increased. It is observed that the real effective exchange rate, which closed 2019 with a value of 76.22, focused on the decline with the effect of the pandemic with the March period. The low volatility of the exchange rate limited the fall of the index in the March-May period in question.

Source: Tera Menkul
Hibya News Agency