Post Tagged with: "Turkey"
Turkey: Outlook Remains Bearish
The central bank intervened aggressively in September-October to limit TRY weakness, but it does not have a huge war chest like Brazil or Asia. Reserves were $84.4 bln at the end of October, down 10% from a peak of $93 bln in July. Reserves are thus less than short-term debt of around $85 bln, making a protracted intervention defense unworkable. Instead, the central bank should hike interest rates. While it wouldn’t save the lira in this environment, it would be a step towards re-establishing credibility and perhaps help it become an EM market performer instead of an underperformer
Turkey: On restoring central bank credibility and EM vulnerability
The Turkish central bank took a turn back to orthodox policy today despite leaving the benchmark 1-week repo rate unchanged at 5.75%. It dropped the language from several previous meetings about potential easing. The bank did hike the overnight lending rate from 9% to 12.5% and the late liquidity borrowing rate from 12% to 15.5%. These hikes are meant to tighten liquidity by raising the cost of borrowing from the central bank, but we do not think it is enough to change the outlook for the lira yet. What’s needed to restore central bank credibility is a more pronounced tightening in monetary policy, and yet policy-makers are not ready to do this due to slowdown fears
Some Thoughts On EM FX Intervention And Vulnerability
Markets have been punishing countries with the weakest fundamentals, focusing on either high inflation, large current account and budget deficits, external debt loads, or a combination of these. These other vulnerability measures in the table also support the widely held view that Asia has the strongest fundamentals, EMEA the weakest, and Latin America somewhere in between. But we do note that there are pockets of vulnerability in Asia (India, Sri Lanka, Vietnam) and Latin America (Argentina)
EMEA central banks have moved into dovish mode
In the EMEA space, central banks from Czech Republic, Hungary, South Africa, and Turkey all meet next week. We don’t see any change from these four central banks and in general we believe EM central banks have moved into dovish wait-and-see mode for now, with the obvious exception of Brazil and Turkey, who have both cut, and RBI, who just hiked 25 bp for purely domestic reasons
SNB takes action against strong CHF
US growth concerns and downgrade risk remain in play after budget deal. Euro zone periphery remains under pressure as ECB meets Thursday. SNB takes action against strong CHF; spike in EUR/CHF offers good entry point to go long
Greece: Last Exit To Nowhere?
If the strongest argument against going back to the Drachma always was that this would imply default, now that default is coming, why not allow Greece to devalue? As Krugman says, the issue isn’t whether Greece would openly decide to exit the euro, the issue is what happens if the markets force this solution on Greek and European leaders? Given the programme isn’t working, the likelihood of this event occurring in the next 2 or 3 years is far from being negligible, so why not be proactive rather than always being reactive? What matters is whether Greece becomes Turkey (oh what a historical irony) or Argentina. If the powers that be can agree on an ordered restructuring of Greek debt, and a controlled exit from the Eurozone, then Greece has some possibilities of turning the situation round. If exit is forced on Greece in order to escape the clutches of both the EU and the IMF then the move will be, as I suggest in my title, simply the last exit to nowhere
Emerging Markets: Turkey Currency Outlook Deteriorates As Inflation Forecasts Raised
The Turkish lira is under pressure today, and is also due to some market concerns with central bank credibility. Like in Brazil, Turkey macroprudential policies simply have not worked
Turkey’s Audacious Experiment In ‘Post Modern’ Monetary Policy
By Edward Hugh The recent decision of the Turkish Central Bank to lower rather than to raise interest rates in an risky attempt to quench the inflation flames that many feel are threatening to engulf what some call an “overheating” economy (or here) has lead to a good deal of heart-searching and consternation in the
Turkey Rate Cut Very Negative For Turkish Lira, Further Losses Likely
As we feared, Turkey central bank cut rates by 50 bp to 6.5%. Before the recent comments by Deputy Governor Basci, the bank was saying that rates were headed higher towards the end of next year. Latest central bank survey shows market was looking for 50 bp of tightening over the next 12 months, so
Policy Uncertainty To Weigh On Turkish Lira
by Win Thin There seems to be some policy uncertainty brewing in Turkey, which we view as negative for the lira. Today, central bank Deputy Governor Basci published a paper on the bank’s website that suggested a combination of interest rate cuts to limit TRY strength and higher bank reserve requirements to slow credit growth
On The West Losing Turkey, An Australian Housing Bubble And Other Links
Must-read The Anatolian Tiger: How the West Is Losing Turkey – SPIEGEL ONLINE Video – Property market ‘overheating’ – Brisbane Times Euro investors eye local Australian property market The Usual Fare San Diego May Use Bankruptcy to Roll Back Benefits: Joe Mysak – Bloomberg.com China may avoid housing bubble, says Grantham Emerging Markets Report –
Euro Bounces On Greek News, Now Looks Ahead To ECB Meeting
The following is a post by Marc Chandler, global head of Brown Brother Harriman’s top ranked Currency Strategy Team. For more of BBH’s currency views, please visit the BBH FX website here. Highlights The US dollar was largely weaker vs. the majors as optimism picked up regarding Greece (see below). EUR/USD traded at its highest