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The strong depreciation of the TL, which was seen with the negative divergence from similar currencies, started with the CBRT policy rate holding steady and tightening as the interest rate corridor widened contrary to expectations.
Recently, geopolitical developments have added to concerns that tension with the EU and the US may increase and the upcoming US elections have added to the factors influencing the depreciation of the TL.
The investor meeting of Treasury and Finance Minister Berat Albayrak held the day before for executives of global companies was also followed on the market. Albayrak Turkey is at an economic turning point, while a new wave of capital investment appears on the horizon; He explicitly denied the capital control questions.
INCREASED UNCERTAINTY IN MONEY POLICY
Although the CBRT held the policy rate constant last week, it raised the late liquidity window (GLP), which determines the upper limit of liquidity tightening phases, to 14.75% with an increase of 150 basis points. The weighted average cost of financing the CBRT is over 13% as of yesterday.
Since mid-July, the tightening has been carried out by around 550 basis points. However, the process did not create significant optimism in TL. Overnight interest rates rise to 14.5%, approaching the 14.75% limit set by GLP, and the market thinks the average cost of funding will approach overnight rates with some delay.
Claiming that the bank’s statements regarding the recent depreciation of TL and the effect of this depreciation on inflation will be followed, the bankers point out that monetary policy uncertainty has increased after the CBRT widened the interest rate corridor. .
Bankers, on the other hand, draw attention to the compatibility of the CBRT decision with the competitive TL rhetoric of the economic administration. Economic management’s desire for TL to be competitive shows that no significant appreciation in TL is preferred.
However, this process leads to drastic reductions in the portfolios of foreign investors. Likewise, these policies raise question marks about the decline in reserves due to the public’s foreign exchange supply, which has reached $ 130 billion since 2019.
The so-called hot money economic management together with the long-embraced competitive rhetoric and Turkey’s current account deficit for many years to finance the consciously reduced type of financing, called for an increase in the direct investment share.
Bankers today are at the level of achieving average expectations regarding belirginleşerek yep 8 in 2023. They are concerned about the depreciation of TL will be evident from the decomposition of Turkey’s macro picture yes, especially inflation.
In YEP, the government’s average dollar / TL estimate is around 6.9 for 2020 and 7.7 for 2021. Among the closely monitored developments in the market, the US elections, Brexit, the global upward trend stand out. and local coronavirus, concern over the escalation of tensions with the EU, the Azerbaijan-Armenia tension and the ongoing process on S-400 air defense systems. Coronavirus is a further development of the apparent increase in the epidemic in Turkey, followed closely by the markets. (REUTERS)
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