CBRT measures just ain't gonna cut it
The lira has fallen even more after retracing some of its earlier losses following the CBRT announcement. USD/TRY was trading around 6.75 prior to the first statement release and has since marched higher after having fallen to a day's low of 6.45.
As mentioned earlier, the CBRT's support measures here are a far cry from what any rate hike may offer. And it shows that they are unwilling to defy Erdogan's clear distaste for higher rates. All the support measures announced in the last hour has been anything but touching on rates.
The finance ministry is due to come forth next to outline their support measures but unless they are along the lines of capital controls or what not, I don't see how this ends well for the lira in the long-run.
Right now, volatility is extremely high and the lira is very sensitive to fluctuations. As I type this now, USD/TRY has fallen back to 6.70.
It's a topsy turvy ride for the lira as traders are looking to book profits whenever we approach the highs once again. But fundamentally, it's going to take more from Turkey if they actually want to address the root of the problem here. Pumping more liquidity into the market isn't the solution.
