Just a small push by the Turkish Central Bank in the wrong direction is needed to lean into an outright currency crisis, according to economists at Danske Bank. USD/TRY is sitting at 6.9955.
Key quotes
“The best way to ensure a stable currency is to aim for CPI stabilisation in the first part of a recession; this is, in turn, vital for the central bank in order to maintain financial stability.”
“Only after a stable inflation path is ensured, lowering interest rates is a viable path. It goes without saying that the current Turkish path looks very unstable and we see a high probability of a currency crisis in coming months.”
“While we may well end the year with USD/TRY in the low-to-mid 7s, overshooting near-term seems highly likely right now.”
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