The steep decline in the level of foreign exchange reserves of Turkey's central bank raised fears of an impending "exchange rate shock" in the country, and if its currency interventions are to be discontinued, the dollar may begin trading against the national currency, the lira (USDTRY), in the range of 25-30, strengthening noticeably from the current rate, but still, most likely, not higher than 20 lira per USD for now.

According to the Central Bank of Turkey, whereas as of May 5 its reserves stood at $68.4 billion, by May 12 they had dropped by almost $8 billion to $60.8 billion, approaching the level of last summer.

The ongoing collapse of foreign reserves, which depleted the central bank's ability to intervene in exchange rates, reinforced the perception that 'there are no reserves left to sustain the current exchange rate”. Exporters reacting to the dollar exchange rate, which soared to 19.5 lira per USD officially and 22.5 lira on the black market, want the exchange rate to be at least around 25. In economic circles, experts argue that the exchange rate could be in the range of 25-30 if the interventions are canceled.

The lira is now trading at 19.56 to the dollar, but in currency exchange offices in Ankara and Istanbul, the dollar is bought at a rate above 20 and sold at 21 and above. A year ago, the lira/dollar exchange rate was 16-16.5 to USD.

Meanwhile, the annual inflation rate in Turkey was 43.7% in April, down from 50.5% for the month, the country's statistical institute (Turkstat) said. In turn, the Independent Inflation Analysis Group (ENAG) said that the figure actually exceeded 105%. The Central Bank of Turkey forecasts that inflation will be 22.3% by the end of the year.