USD/TRY: RELENTLESS LIRA DEPRECIATION TREND IN THE BACKGROUND TO PERSIST – COMMERZBANK

The Turkish Lira is deceptively stable on a day-by-day basis. But, the slow and steady depreciation trend very much persists in the background, Tatha Ghose, FX Analyst at Commerzbank, reports.

Slow, creeping Lira depreciation takes its toll

“As Lira weakness has persisted despite the recent ‘photo ops’ of CBT receiving $5 bn deposit from the Saudi government, fresh tightening of restrictions were deemed necessary. CBT issued guidance to all banks last week to widen their spreads on retail Dollar purchases which tantamounts to some ad hoc price control.”

“Weekly regulator data showed that Turkish banks are running a net deficit FX position amounting to 2.1% (of equity) for state banks and 1.3% deficit for the sector, overall. In other words, they will look to buy FX at some point.” 

“An ad hoc price control has little potential to stop the relentless depreciation trend in the background, let alone address any underlying economic imbalance.”