Try Faces Risks Commerzbank

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Try Faces Risks Commerzbank

Try Faces Balance Of Payments Risks - Commerzbank

According to Commerzbank, the recent balance of payment data has raised serious concerns about the Turkish Lira. They added that market volatility and political tension could reverse the flow of foreign capital.

Since the detention of Istanbul's mayor, the market volatility in Turkey has reached new heights. This has also pushed the TRY lower against other currencies.

Central Bank Intervenes To Support Try

To counter the TRY weakness, the Central Bank took decisive actions. This included raising the interest rates higher, but it still doesn't solve the underlying issues.

Commerzbank added that the central bank has once again introduced the rate corridor. This is followed by the FX interventions, which also disturb the natural dynamics of the currency markets.

Meanwhile, the cost of funding is now a lot higher than the interest rate in the country. Also, the bank continues to change its monetary policy a lot. Over the long term, this will diminish the effects of higher rates and will not be good for the TRY.

According to reports, around $57 billion worth of losses have already happened in the last few months. This has raised the CBT's re-building efforts of almost 2 years.

Also, a major net outflow was seen in several sectors of the market. That's also something which will further weaken the Turkish Lira in the coming months.

With so much going on, Commerzbank remains bearish on the TRY during the next few months. But an improvement in the political situation could allow some breathing room to the TRY.

But, will that be enough to reverse the net outflows and lead to net inflows of the foreign assets? It could happen, but it is still too soon to say that the balance of payment crisis has ended.

Overall, the ground situation looks very difficult for the TRY. From tariffs to trade wars to everything in between, there's a lot which can impact the TRY.

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