Guarding your experience

And again about the Turkish lira - what's new this time?


17 / May / 21 Bunsi Shakiramal Visitors: 62 Rating: ★★★★★

USD / TRY hit 8.41 yesterday; the worst times for the Turkish lira were only in November, when the rate reached 8.56.

Yesterday's fall in the Turkish lira was due to the fact that the president fired the deputy chairman of the Bank of Turkey (and this is 10 days after the chairman was fired).

In fact, the dismissal of the deputy after the removal of the chairman of the Bank of Turkey does not bring any new information for the market. Here the lyre returned to the 8.3 levels.

Moreover, some "suspension" of the fall of the lira may have been associated with the speech of the new head of the Turkish Central Bank. The chairman of the regulator promised to maintain a tight monetary policy and keep the rate above inflation.

In my opinion, this statement by the Chairman of the Bank of Turkey is generally not a reason for even minimal reassurance. A tough monetary policy implies a key rate above the neutral rate. Turkey's neutral rate is clearly above 17% due to high inflation and country risk. However, everyone interprets the neutral rate differently. And nothing prevents the new chairman of the Bank of Turkey from taking and lowering the rate by 1-2 percentage points. And then the market reaction will be panic, the lira will immediately break through the old lows.

Erdogan's calls for the people to convert their foreign exchange and gold reserves into lira are a sign of desperation. Especially considering that the population continues to buy gold and dollars.

Output? The Turkish lira remains a highly volatile and dangerous currency. If USD / TRY surpasses the 8.5-8.6 mark, the Turkish Central Bank is likely to start active foreign exchange interventions, spending the reserves it has left. But that won't last long. So it may not be that far from limiting capital flows.

To be honest, the Turkish lira worries me very much, and rightly so. No matter how this concern spills over to other EM currencies.

Comments 0