USD/TRY: To 16.00 and beyond? – Credit Suisse

USD/ TRY has been rising on a steady basis since it broke above the 15.00 mark on Monday last week. Economists at Credit Suisse think the CBRT will aim to keep USD/TRY below 16.00 in the near-term, but see risks of larger repricing beyond 16.00 as still in place.

Markets are likely to eye the 16.00 level in USD/TRY in the short run 

“The central bank will aim to keep USD/TRY upside capped at the next rounded level – which is 16.00 – via FX intervention. Based on their policy response in recent months, Turkish authorities will probably also look into expanding current policies or adopting new ones in an attempt to keep USD/TRY below certain thresholds.”

“Still, persisting buying of dollars, if continued, might force the central bank to allow a larger repricing in USD/TRY (e.g. to 16.50 or even to 17.00) already in the coming weeks.” 

“The combination of negative real rates and lack of sufficient inflows on the financial account side to fund the current account deficit keep the lira vulnerable.”