Turkish lira is poised to keep suffering – Commerzbank
|The Turkish Central Bank (CBRT) is quite courageous as reduced the One-Week Repo Rate by a full point to 12.00%. The USD/TRY pair picked up pace following the announcement and the lira is set to remain under pressure, economists at Commerzbank report.
Playing with fire
“To lower the key rate by 100 bps to now 12% at an inflation rate of over 80% must be seen to be courageous by the market. Based on conventional monetary policy theory that does not justify rate cuts. The FX market sees that and is putting pressure on the lira.”
“CBRT may be able to prevent more pronounced lira weakness with the help of soft capital controls (its so-called policy of liraisation) for some time, but if the market gets the impression that things have gone too far (it is difficult to predict what might trigger that) it might face a massive selling wave. We remain cautious and expect continued lira weakness.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.