TRY: Resumed its falling trend against the dollar - Rabobank

Analysts at Rabobank note that the Turkish lira has resumed its falling trend against the dollar as USDTRY is up almost 2% this morning from yesterday’s close.

Key Quotes

“20 of Turkey’s financial institutions saw their ratings downgraded by one or two notches by Moody’s, as the rating agency sees “a substantial increase in the risk of a downside scenario, where a further negative shift in investor sentiment could lead to a curtailing of wholesale funding”.”

“According to the rating agency, USD77bn of foreign currency bonds and loans are falling due over the next 12 months for Turkey’s banks, an amount that exceeds bank’s liquid foreign currency assets and mandatory reserves.”

“Trying to stem financial stress, the CBRT doubled banks’ borrowing limits for overnight transactions at the interbank money market. The measure will be effective as from today.”

“We remain of the view that to restore shattered confidence amongst investors and to stabilise the lira in a sustainable way three issues must be urgently addressed: the central bank should raise interest rates significantly on September 13, substantial fiscal stimulus that led to economic overheating and contributed to inflationary pressure should be withdrawn and major effort to ease tension between the US and Turkey should be made.­”