Türkiye: The depreciation of TL

As of this morning, there is a very clear movement in the exchange rate. This exchange rate movement was heavily suppressed by alternative financial instruments before the election. Of course, the new period will bring a more liberal approach in this regard and will create a situation that will enable the TL to get closer to its real value. The factors that kept the rate under pressure were coercive measures that tried to somehow achieve reverse dollarization. Looking at the other side of the business, the normal movement is the depreciation of TL in the framework of high current account deficit, low reserves and high inflation. In the period when the exchange rate was depressed, the exporter had difficulties in determining prices in foreign markets and creating the value of goods. There is also an exporter requirement.

Within the framework of Turkey's macro variables, there is a normal movement for TL to do. Therefore, we expect the TL to go through an oscillation in a short period of time, although there will likely be serious rate hikes with orthodox policies. Whether the high movement in the morning is a projection of these expectations or whether it is the effect of individual transactions during low liquidity hours, it will be understood more clearly in the movements after the domestic markets open. Our expectation is not for an appreciation of the TL, but for a depreciation on the contrary.

TL movement… Source: Bloomberg

After the appointment of Mr. Mehmet Şimşek, many institutions started to publish their expectations that the CBRT could raise the policy rate to 25% in one fell swoop, on June 22. Although we expect an interest rate hike at this meeting, we prefer to follow the possible changes in the CBRT for now, for our final expectation. Problems, especially inflation, which hindered the delivery of the outputs of the New Economy Model, needed to be overcome, and a change in approach was needed in the short term. The upcoming period will be a transformation phase, however, we will see that a number of banking regulations are withdrawn or eased to prevent interest rates from increasing (most of them will not be necessary if policy rates are to increase), the exchange rate will be left to a freer circulation and demand will slow down with increasing interest rates, demand-based imports will decrease. We'll see. The current account deficit will decrease with the economic slowdown in a certain period, and capital/portfolio inflows will increase with the positive real interest effect in this period. In the short term, we will see the effects of transformation on interest, demand, exchange rate, inflation and growth variables.

Kaynak Enver Erkan- Dinamik Yatırım

Hibya Haber Ajansı