Many in Turkey believe lira crisis is over and certainly the CB has acted creatively to make the best of very low liquidity (in part created by them).
But endless fiddling with rates (part of the complexity markets hated in the first place) and SWAPs isn't a long term solution.
But endless fiddling with rates (part of the complexity markets hated in the first place) and SWAPs isn't a long term solution.
At some point, domestic demand for dollars is going to increase. This is a 100% certainty because there is so much FX denominated debt. That is the only time horizon that matters, not whether USD/TRY goes below 6 before Bayram.
Almost everyone who follows me knows all of the following but it is worth repeating: domestic retail sales of dollars don't really move the needle. Interest rate hikes would. Proposals for strengthening corporates and banks would. Deescalation with the US would.
A final note: I have just spent some days in Turkey and you would not believe how strongly AKP loyalists and opponents alike are buying into the "economic warfare" discourse. I always knew Trump was a complete idiot but with his Turkey play he has really screwed it all up.
