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Southeast Europe
July 12, 2019 www.intellinews.com I Page 18
Turkish President Erdogan sacks the governor of the central bank
bne IntelliNews
Turkish President Recep Tayyip Erdogan has sacked the central bank governor Murat Cetinkaya and at the same time appointed the deputy governor of the central bank Murat Uysal as the new governor. An official announcement appeared on the morning of July 6 in the Official Gazette.
“Its tin hats time in [Turkey’s exchange rate with the dollar] USDTRY,” tweeted Paul McNamara, investment director and lead manager on emerging market bond and currency long only and hedge fund strategies at GAM Investments.
Investors and currency traders are bound to panic after Erdogan used a presidential decree to sack Cetinkaya, whose term has another year to run, and replace him with his deputy.
The new governor Uysal served as Treasury head at state-owned lender Halkbank from 2011 to 2016 and he was appointed as deputy central bank governor in 2016, according to a statement by the central bank.
The bank is due to hold its next Monetary Policy Committee (MPC) meeting on July 25. Uysal will hold a press conference in the coming days, the central bank said.
Market expectations were shaped for the beginning of a rate cut cycle at the July 25 meeting.
However, the latest scandal could further undermine the credibility of the central bank to cut the rates and a sharp rate cut could trigger renewed turbulence in Turkish markets.
Turkish President Recep Tayyip Erdogan sacked Murat Cetinkaya the governor of the central bank that could plunge the currency into a new crisis.
Turkey has been enjoying something of a relief rally after Erdogan has accepted the results of the Istanbul local election revote and he seemed to be on good terms with US President Donald Trump last week in Osaka during the G-20 summit, but analysts say the decision to sack Cetinkaya may derail a rally in the lira that started at the beginning of May.
Presciently VTB Capital (VTBC) called on investors to sell Turkish assets on June 6 arguing that the recent bull run had run its course.
“This was a particularly strong rally in a short pe- riod of time, outperforming EM indices by 16% dur- ing that period. We believe it is not worth chasing this rally, and that in fact it is worth taking profits from a trading perspective,” VTB said in a note.
"This week’s rally in the Turkish lira could quickly go into reverse if US President Trump’s conciliatory comments regarding Turkey’s purchase of Russian defence equipment prove to be a false dawn," Liam Carson of Capital Economics also said on July 5 in a research note entitled "Lira rally may be short-lived".
“Those who removed the central bank governor overnight have lost the right to demand confidence in the country’s economy. The central bank is a captive being kept in the palace,” spokesman of the main opposition CHP, Faik Oztrak, wrote on Twitter.
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