TURKEY: Commerzbank See Little Evidence of TRY Enjoying Appreciation Pressure

Commerzbank write on Simsek’s theory yesterday that the TRY would appreciate strongly if the CBRT weren’t buying USD: 

• They see the finance ministry signalling a growing sense of confidence that the FX situation is getting more comfortable, and suggested that policymakers will look to liberalise some of the soft capital controls which had been in place since 2018. 
• However, they doubt what Simsek meant by buying dollars is that CBRT is having to use significant FX interventions to keep the TRY from appreciating. They posit that he meant that the TRY’s recent rally could have been more pronounced had CBRT not being buying export proceed from exporters. 
• They conclude that Turkish policymakers are right to use any favourable conditions to ease controls and implement reforms. But fundamental data do not support any hype about less policy challenges, or about the currency enjoying genuine appreciation pressure.