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16 May 2013
Forex Flash: TRY – Weak data support further cuts – TD Securities
FXstreet.com (London) - Cristian Maggio, Senior emerging Markets Stratergist commeted on the recent move by the CBRT. He said that the move came in line with their forecast and a minority of economists, the CBRT delivered aggressive easing of the three main rates, by cutting the benchmark repo rate to 4.50%,
He pointed out that as a consequence, USD/TRY moved higher to 1.8285 at the time of writing, from around 1.8232 just before the meeting. They note that at these levels, yields look unsustainably low and the curve too steep vis-à-vis inflationary risks. Accordingly, he believes the low rate/steep curve environment will last as long as in the CBRT’s policy mix prevails the dovish leg. But in H2 2013, his teams expect some normalization to take place, with most easing already delivered by now and short term yields at risk of correction.
He pointed out that as a consequence, USD/TRY moved higher to 1.8285 at the time of writing, from around 1.8232 just before the meeting. They note that at these levels, yields look unsustainably low and the curve too steep vis-à-vis inflationary risks. Accordingly, he believes the low rate/steep curve environment will last as long as in the CBRT’s policy mix prevails the dovish leg. But in H2 2013, his teams expect some normalization to take place, with most easing already delivered by now and short term yields at risk of correction.