Turkish Lira Maintains Its Positive Divergence

The Turkish Lira continues its positive divergence within the currencies of developing countries.

Turkish lira maintains its positive divergence. The divergence in the Turkish lira, which started on Tuesday, continues on Wednesday as well. USD/TL exchange rate declined below 8.60 level. However, the decline in the exchange rate since the beginning of the week has reached 1.5 percent. Fed Chairman Jerome Powell's reiterated statement that inflation is temporary had a positive impact on emerging market assets. Turkey's risk premium is trading at 383 basis points, while the benchmark bond rate is 19.10 percent.

CBRT Governor Met with Bankers

Governor of the Central Bank of the Republic of Turkey Şahap Kavcıoğlu met with the bankers for the second time after taking office. Stating that they have reached a very good point with the two central banks in the swap negotiations held on Tuesday, Kavcıoğlu stated that the reserve requirement arrangements could be changed. HSBC Asset Management Chief Economist İbrahim Aksoy said that unless a swap agreement is signed with European and US central banks, the impact of these agreements on the Turkish Lira will not be permanent. Aksoy continued his evaluations on the subject as follows: “We maintain our assessment on TL. We think that the positive effect of the swap agreements made after the CBRT, European Central Bank or the Fed did not sign a swap agreement on the TL may not be permanent.” Despite the gradual developments in tourism, the relatively high current account deficit relative to the reserve levels, the possibility of falling real interest rates in the rest of the year, and the fact that the Fed's pricing may continue indicate that the Turkish Lira may continue to be fragile in the rest of the year.