FX debt to haunt Turkey - Rabobank

The Turkish lira remains one of the main barometers of sentiment towards emerging markets, according to analysts at Rabobank.

Key Quotes

“Various measures announced last week by Turkey’s central bank, which essentially implemented a backdoor tightening as banks need to borrow at the overnight lending rate of 19.25% instead of the main policy rate of 17.75%, have stabilised the lira.”

“Turkey’s banking regulator also made it prohibitively expensive to bet against the lira by reducing banks’ ability to supply the Turkish currency to foreign banks and financial institutions.”

“However, major rating agencies seem to share our and market concerns about Turkey’s ability to manage the currency crisis, which is likely to have negative consequences for those Turkish households and corporates which accumulated substantial FX debt.”