USD/TRY above 7.50 would prompt rate hike – Barclays
|Economists at Barclays noted that the Turkish lira is still under that level, which could prompt the central bank to consider a rate hike.
Key quotes (via Bloomberg)
“Unless the dollar-lira pair exceeds 7.50, Turkey’s central bank will “keep its policy rates stable and manage the volatility by moving within the corridor and reducing TRY liquidity in the system.”
Turkey’s policy rate to remain on hold at 8.25% for the rest of the year; “however, the risks are clearly to the upside following the recent volatility” in the lira.
The main factors behind the lira’s volatility are local demand for hard currency and a “relatively muted reaction” from the central bank in terms of foreign-exchange sales.
Even if the central bank shifts to using the Late Liquidity Window to fund all lending at 11.25%, Barclays says it “may not be sufficient enough to limit locals’ FX demand, ceteris paribus”
Policy makers will likely raise the blended funding rates toward 11.25% while evaluating the effect of their measures over the next few days; the central bank is set to continue to “intervene verbally if needed” until the next meeting of the Monetary Policy Committee on Aug. 20.”
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.