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No hope for TL despite several positive announcements

As a result of this torrent of measures and announcements, dollar/TL declined below the 6.90 critical resistance—for an hour or so. But the souring mood in global markets precipitated new TL sales

No hope for TL despite several  positive announcements

On Sunday Central Bank governor Murat Uysal heralded that Turkey is in contact with other nations for swap lines. On Monday, Bloomberg broke the unconfirmed story that the Treasury is contemplating a new dose of capital injection into the state  banks. A new regulation issues by banking regulator BRSA “encourages” banks to lend their FX deposits to Central Bank, which would then count them as reserves. As a result of this torrent of measures and announcements, dollar/TL declined below the 6.90 critical resistance—for an hour or so. But the souring mood in global markets precipitated new TL sales.

 

USDTRY continues its trip to 2018 highs as Turkey has now surpassed China as the country with most coronavirus infections outside the U.S. Turkey reported today 86,000 confirmed cases with 2015 deaths. Turkey avoided a full lockdown over the coronavirus outbreak because of its possible cost to the country’s economy. Turkey already had big problems in the economy, and the coronavirus crisis just made things worse, writes Nicholas Papas at Investing Cube.

 

The central bank of Turkey cut several times the interest rates the last months, and now the basic rate stands at 9.75%. The government announced a 100 billion-lira relief package to help keep the Turkish economy on its feet. CBRT started a 90-day repo auction up to 10 billion liras and an interest rate of 8.25% about 150 bps below its policy rate.   Turkey’s money supply rose by 50% over the last year compared to a CPI inflation of ca 12%, fanning the flames of currency circulation.  Today’s demand may also be coming from retailers, mindful of ever falling deposit rates on TL.  Central Bank is expected to cut rates in Thursday’s Monetary Policy Council meeting by as much as 50 basis points.

 

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