The Turkish Lira continues to lose heavily and is very close to historic highs, looking at the USDTRY pair. The next decision is only in 2 weeks, but already this week Erdogan indicated again that he expects a further cut in interest rates, from the current level of 14%. Recall that inflation in Turkey broke through the next level and in May is already 73.5% y/y.
Turkey's foreign exchange reserves are only a few billion dollars, but without swaps they would be negative. In view of this, there is a huge risk that capital controls will be introduced to end further depreciation of the currency. Of course, it is worth remembering that such a decision makes no sense in the long term, given the desire to return to the financial markets. Such decisions are only good at a time when a quick return to normality is expected. Turkey suffers greatly from high oil prices, as it imports virtually every barrel it consumes. S&P Global points to the very high risk of introducing capital controls (it is worth remembering what happened to the ruble - the ruble exchange rate is kept artificially at a very strong level, but at the same time there is no possibility of entering into transactions on the ruble). Meanwhile, the forward 1-month rate for USDTRY is 18.3...
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