Page 10 - TURKRptDec20

Officials hope the moves will stop the rot when it comes to the TRY depreciation but the currency has been back on the negative path since November 19. November 24 saw it fall back over the 8-level against the dollar, hitting 8.05.
On November 11, Turkish banking watchdog BDDK increased local banks’ swap limits to provide USD to London at spot in exchange for lira.
As a result, the banks’ swaps with the central bank declined and the central bank’s net international reserves fell to $16.4bn—the lowest level recorded since 2004—as of November 13 from $19.6bn a week earlier.
Developments in the central bank’s short FX position and the rising lira liquidity in London​ will be watched in the coming period as observers weigh up the lira’s short-term destiny.
Turkey’s ongoing monetary tightening started via backdoor moves in mid-July that were unable to stop the lira crashing into a second currency crisis within just over two years. The impact of the tightening on ​deposit and loan rates and on loan flows and FX deposits​ will also be tracked in the coming period in relation to the macroeconomic direction.
However, the ​market—which essentially took back control of Turkey’s economy and the lira from November 9​ after Erdogan’s weekend change of course led to him firing the central bank governor and accepting the resignation of his son-in-law finance minister—is not interested in the real economic direction but in the short-term gains to be had.
Let’s take a look at what could take the wind out of its sails.
1-) Mercurial Erdogan can start talking in the wrong direction at any time and the market-makers can’t avoid the shower of manure that might follow.
On November 18, Erdogan actually talked:
BFW 11/18 11:55 *ERDOGAN: HIGH RATES RENDER PRODUCTION, EXPORTS IMPOSSIBLE
BN 11/18 11:54 *TURKEY PRESIDENT RECEP TAYYIP ERDOGAN SPEAKS IN ANKARA
BN 11/18 11:54 *ERDOGAN: IT'S OBVIOUS WHAT HIGH INTEREST RATES CAUSE
Markets took it on the chin but some magical invisible hands held up the lira. Beware though, the Dear Leader could speak out again at any time.
2-) End-year position closures.
We’re going through the end of November and many people will close their positions before the Christmas break.
Erdogan has a ​scheduled monetary policy committee (MPC) meeting on December 24​ and the market ​wants​ more.
3-) “Sleepy” Joe Biden
The “Sleepy” risk is declining sharply as Erdogan has been signalling his legendary skills in making U-turns in line with which way the Washington wind is blowing. The US establishment has been signalling back, welcoming Erdogan’s retreat.
The US Congress or courts could no doubt make trouble at any given moment over Ankara’s Russian S-400 missiles and the Halkbank indictment on dodging
10​ TURKEY Country Report​ December 2020 ​ ​www.intellinews.com