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USD/TRY Skyrockets +12.63% as Erdogan Backs Low Rates Policy

TURKEY
  • USD/TRY trades +1.95% higher this morning, continuing to press skywards after yesterday's notable run above 13.00.
  • The cross closed +12.63% higher after pulling back from the 18.17% peak around 13.4539 after Erdogan and the MHP stood behind the current economic stance – driving panic selling of lira assets across the board as offers evaporated and liquidity diminished.
  • Meanwhile, the CBRT said it would only consider using FX reserves in bouts of severe volatility, which suggests they're hard pressed to intervene, given the ~$120bn in gross FX reserves.
  • Sell-side analysts are now calling for an emergency hike in the 400-600bp range by 2Q22 with the situation likely to demand policy changes from the CBRT soon.
  • Opposition parties and members of the public are voicing their discontent with protests breaking out overnight calling from the AKP to resign, despite Erdogan dismissing calls for early elections.
  • It's highly unlikely that Erdogan would support an early election, given how poorly the ruling alliance is polling – so as long as he has absolute power there seems little chance of an early election.
  • Volatility should remain high today, with the next notable topside levels at 13.4539, 14.00 & 14.50, while supports come in at round numbers 12.50 & 12.00.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

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