USD/TRY: Upward pressure to persist as real rates look set to remain far into negative territory – Credit Suisse

Economists at Credit Suisse think upward pressure on USD/TRY is likely to persist, but expect realised volatility to moderate, as the central bank has resorted to FX intervention.

The central bank has resorted to intervention in the FX market more frequently in recent days

“Our core view remains that USD/TRY will stay subject to upside pressure as real rates have fallen substantially in recent weeks while the inflation outlook has worsened.”

“For now, central bank intervention in the FX market is likely to persist. The two FX intervention episodes last week suggest that the central bank aims to create a notable price impact by selling large amounts of dollars in concentrated time periods. Last week’s two intervention episodes also suggest that the immediate aim is to prevent a move in USD/TRY to levels above 14.00.”

“We would expect that if USD/TRY rises to levels above 14.00, the central bank will mount relatively heavy FX market intervention, especially on possible spikes towards 14.50.”