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hot money.
Hot money of course is not interested in longer-term realities but in short-term hit-and-runs. And turning to hot money is another sign of how desperate the Turkish government is at the moment.
Moreover, if the Erdogan administration manages to launch a new hot money cycle, it should be observed that the cycle that follows the last is always shorter and more damaging.
Meanwhile, the markets are currently in limbo as the hot money bulls and the sceptics mark out their ground.
When it comes to the Turkish markets, one should never forget the impact of the government’s invisible hand in supporting campaigns such as the recent so-called Black Sea natural gas discovery that the true experts have pointed out could eventually be shown to be hardly a discovery at all and the surprise rate hike that could turn out to be no such thing.
The two sharp moves on the USD/TRY chart in the past two days—the first coming just after the confounding rate increase announcement and the second during low liquidity morning hours of September 25—reek of the strategy pursued by the “native and national FX teams” working at government-run banks.
Market-making news services and the returning hungry hot money brigade seem to be coalition in saying that Turkey’s moves, since the afternoon of September 24, are extremely positive and show a certain commitment that should be seen in upcoming steps.
Deutsche Bank called the hike a "game changer" for Turkey, while fund manager BlueBay Asset Management said the loosening of the domestic banks' FX limits offered hope that the authorities "finally get it" that tight restrictions are counter-productive, Reuters reported on September 25.
On the other hand, Tatha Ghose of Commerzbank, told Reuters separately: “Investors are mainly interested in whether or not [the interest rate hike] can break the depreciation momentum which the lira had picked up over the past month.”
In the coming period, whether and how much hot money will return to Turkey will be closely watched.
2.7​ ​Erdogan ‘shuns Uyghurs as China provides support to ease Turkey’s economic crisis’
The reality of Turkey’s crisis-stricken economy and the financial support China
11​ TURKEY Country Report​ October 2020 ​ ​www.intellinews.com