Five more years

Marten Lund, analyst, Nordea

Dünya Executive - - REPORT -

Although Pres dent Erdogan’s t ght gr p on the Central Bank demand ng too low nterest rates s the ma n reason why the TRY s so weak, the n t al react on n the markets after Erdogan’s w n has been sl ghtly on the pos t ve s de w th USD/TRY (and EUR/TRY) trad ng lower. Nonetheles­s pol t cal uncerta nty rema ns n Turkey, and consequent­ly, we expect th s m ld

TRY apprec at on to be short-l ved. The b g quest on s now whether Pres dent Erdogan w ll allow the central bank to act w th more flex b l ty, wh ch we have seen some pos t ve s gns of dur ng the past month. However, we and the markets are st ll not conv nced, as Erdogan has earl er pledged to take greater control of monetary pol cy after the elect on and f these words are to be trusted, t would only spell more trouble for the l ra. Hence, a pol t cal r sk prem um s st ll attached to the Turk sh l ra, and we should not expect to see a much stronger l ra before Pres dent Erdogan allows the central bank to act w th more flex b l ty and thereby restores ts cred b l ty. (June 27)

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