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Although the surprise rate hike of the Central Bank (CBRT) and the subsequent relaxation of swap restrictions by BRSA brought serious optimism to the Turkish lira, the global appreciation of the dollar and the growing geopolitical tension dissipated the optimistic atmosphere for the Turkish Lira.
With the surprise rate hike of the Central last week, the dollar / TL fell to 7.51, followed by the geopolitical risks of the dollar, the global appreciation and the selling pressure reduced optimism.
People in Armenia marched down the street to enlist. Photo: Reuters
Conflicts between Azerbaijan and Armenia increase geopolitical tensions over the currency. The opening of a dialogue with Greece in the eastern Mediterranean last week was also positive for the Turkish lira.
WHAT HAPPENS BETWEEN AZERBAIJAN AND ARMENIA?
Tensions are rising on the line between Azerbaijan and Armenia, where tension has been high for years. It was claimed that there were deaths and injuries as a result of the Armenian attack on Azerbaijan. As the attacks continued, Armenia and Nagorno-Karabakh declared martial law and mobilization, and the Azerbaijani Parliament declared a “state of war”. The Azerbaijani Defense Ministry announced that a counterattack decision was taken along the pocket line to ensure war activities against the Armenian armed forces and the safety of the civilian population.
A bank’s Treasury trader told Reuters: “We are seeing a sudden move in TL in the Asian market. It is not understood exactly what happened, but after seeing the 7.8 level in the ilikit market, we came just below the levels before the CBRT interest rate hike at 7.7. When we look at TL comparatively, we can say that we see a serious positive divergence despite the depreciation with the decisions of the CBRT and the BRSA ”.
‘THE AZERBAIJAN-ARMENIA TENSION MAY BE EFFECTIVE IN SALES’
“It’s actually a bit of an unfortunate situation, 2 very strong steps have been taken. These are the steps that will change the perspective of the local / foreign investor. However, coinciding with a period of bad external markets, its nominal effect was limited. Azerbayr tension in Armenia may be effective in sales due to concern in Turkey. We can say that if these two steps did not exist, we believe that the dollar / TL would now be above 8. The possible announcement of OVP is still in the market this week. The CBRT liquidity steps are important. Other than that, decisions to follow in the footsteps of CBRT BRSA will not surprise the market. “
NEW REGULATION TO THE ACTIVE RELATIONSHIP
Another easing took place in the asset index, encouraging banks to lend more or buy government bonds. As part of the normalization steps, the asset ratio was reduced from 90% in deposit banks to 70% in participation banks.
THE LIQUIDITY STEPS ARE FOLLOWED
After the CBRT raised the policy rate, it recast its liquidity steps on Friday.
While the CBRT begins providing financing to the market at a policy rate after nearly two months, bankers expect the weighted average financing cost of 10.69% before the MPC to reach 11% in a short time, and then at the 11.50-11.75% band. The weighted average cost of financing was 10.88% as of Friday.
Images shared by the Ministry of Defense of Armenia show the moments of explosion of a tank belonging to Azerbaijan. / Photo: Reuters
It was being observed whether the rigidity of monetary policy, which remained below inflation, would bring a new direction to currencies, especially local ones. Following the tightening steps Currency deposits, including gold, from locations near the peak with $ 218 billion its course will be closely followed in the market.
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