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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
TURKEY
Despite increasing measures to rein in TRY volatility ahead of the May 14 elections, the USD/TRY spot rate has traded to a fresh all time high and 1M implied volatility has surged to its highest level in over a year.
- In the latest effort to limit TRY volatility ahead of the election, the CBRT reportedly asked local lenders last week to limit the amount of dollar purchases they make in the interbank market to ease pressure on TRY, according to people familiar with the matter. Moreover, there has been a slowdown in the supply of loans by the banking sector both due to the tightening of regulations and election uncertainty.
- Nevertheless, 1M implied USD/TRY volatility hit 39%, its highest in over a year, as the tightly-contested election is now encompassed in the 1 month horizon (figure 1). The government's limited success at reining in TRY depreciation using top-down macroprudential measures is evidenced by the growing spread between the official USD/TRY spot rate and the unofficial 'Grand Bazaar' rate (figure 2).
- While an opposition win would almost certainly lead to a return of orthodox policy, a win for the incumbent Erdogan has less clear ramifications. There had been speculation following the appointment of Mehmet Simsek - former deputy PM and last market-friendly figure in Erdogan's government – could signal a potential pivot in policy. However, in response to a question in an interview yesterday on whether the Turkey Economy Model will continue after elections, Erdogan answered “of course".
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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