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‘Deep’ Negative Real Rates To Continue To Weigh on TRY

TURKEY
  • Yesterday, the CBRT surprised the market by announcing a 100bps cut in the repo rate, decreasing the benchmark rate to 13% (vs. unchanged exp.).
  • This decision goes against the 'Lira-ization' strategy as it pushes real yields to deeper negative territory, therefore could continue to weigh on the TRY in the medium term.
  • We have seen that the economies with deep negative real rates have seen their domestic currency depreciate sharply this year.
  • TRY is the worst performing currency among the EM world, down nearly 27% against the US Dollar.
  • USDTRY broke above the 18 level following the decision and is currently trading at its highest level since December 2021; next key resistance to watch on the topside stands at 18.3630, which was the high reached on December 20th.

Source: Bloomberg/MNI

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  • Yesterday, the CBRT surprised the market by announcing a 100bps cut in the repo rate, decreasing the benchmark rate to 13% (vs. unchanged exp.).
  • This decision goes against the 'Lira-ization' strategy as it pushes real yields to deeper negative territory, therefore could continue to weigh on the TRY in the medium term.
  • We have seen that the economies with deep negative real rates have seen their domestic currency depreciate sharply this year.
  • TRY is the worst performing currency among the EM world, down nearly 27% against the US Dollar.
  • USDTRY broke above the 18 level following the decision and is currently trading at its highest level since December 2021; next key resistance to watch on the topside stands at 18.3630, which was the high reached on December 20th.

Source: Bloomberg/MNI