COMMENT: Turkey - On the wrong side of the confidence Rubicon

2 min read
Divyang Shah

Divyang Shah, Columnist

Divyang Shah

IFR Senior Strategist

This is particularly true for the Turkish lira against a backdrop of political uncertainty, a large c/a deficit and low net FX reserves.

It probably explains why some are speculating the CBRT could announce capital controls instead of (or even in addition to) aggressive rate hikes of 100-300bps when it holds its extraordinary meeting on Tuesday.

USD/TRY has moved sharply lower on the back of the announcement of the surprise meeting but it is still above Friday’s low at 2.28.

The latest bout of TRY weakness started mid-Dec when political trouble started brewing. It seems unlikely that the political situation will get better ahead of local elections in March and presidential elections in August.

The price action and fundamental/political backdrop still point toward further TRY weakness with increased volatility.

Turkey - PM