There are two factors which could weigh on the lira and which probably imply limited downside for USD/TRY even if EM FX markets generally switch to a risk-on tone, according to Credit Suisse.
Key quotes
“First, heavy restrictions by the Turkish regulator on FX forward contracts with foreign investors limit the ability and willingness of investors to short USD/TRY.”
“Second, state-banks will likely buy dollars in case USDTRY falls below certain levels.”
“We think USD/TRY will trade within a range between 6.90 and around 7.10 for now, before the central bank potentially allows it to move above last week’s all-time high of 7.26-7.27.”
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