Turkish lira

Some investors are betting that the Turkish lira’s plunge against the dollar has gone too far, with several taking positions that the currency will improve by buying MTNs from triple-A rated SSAs.

Some investors are betting that the Turkish lira’s plunge against the dollar has gone too far, with several taking positions that the currency will improve by buying MTNs from triple-A rated SSAs.

The recovery of Turkish asset prices this week is less the result of prudent monetary policy — though that certainly helped — and more a lesson in the benefits of the personal touch and that markets are, ultimately, populated by humans.

Turkish dollar bonds outperformed in a heavy market this week after the Central Bank of the Republic of Turkey (CBRT) moved to simplify rates in order to protect the lira. The recovery of the lira to below TL4.5 to the dollar has been taken by the market to indicate that last week’s rate hike was a success.

Turkey’s Central Bank is fighting a losing battle, after its latest bid to protect its currency failed to prompt the support from investors that it hoped for. The move brought the CBRT closer into line with international standards, but could soon be irrelevant after elections on June 24.

Demand for supranational and agency paper in Turkish lira is proving strong despite political tensions in the area.