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IF YOUR ARE NOT BE THE MASTER OF YOUR BUSINESS, YOU ARE NOT THE MASTER OF THE JOB!

Selay GOCMEN

16 Nov. 2019

IF YOUR ARE NOT BE THE MASTER OF YOUR BUSINESS, YOU ARE NOT THE MASTER OF THE JOB!

Turkey’s central bank tried to get up again, the pounds. It is unlikely that his latest effort will ease the pain of our worst performing currency in the emerging markets this quarter.
On Thursday, the monetary authority tried to raise interest rates through the back door, suspended a week of repo auctions, making it costly for commercial lenders to borrow from the central bank.
However, the traders caught when the bank tried the same maneuver just before getting ready for the municipal elections held on March 31st, met their funding needs immediately. This explains TL’s quiet earnings on Thursday. In the afternoon, the currency had only increased by 0.8% against the dollar.
Daily auctions of one week’s money are the main way to provide liquidity to the central bank’s financial system. By stopping them, policymakers risked throwing short-term borrowing costs into the air as banks try to secure funding.
That’s exactly what happened in the past month, overnight rates rose to 1,300% at some point. Then the central bank had to continue auctions to regain the order of this order. If it does not do the same until the end of next week, the rates will be inevitably higher again.
Mixing / stirring money markets is not a way to stimulate confidence in a financial system resulting from the country’s political turmoil. Inevitably, the main loser people, Turkey’s attractiveness for investors will be the currency which will reduce further.
In April, the effect on the currency remained limited to a short two-week rally, furthermore they could not resolve all the gains and more.
This time it seems that it will not be different. Liquidity was still return to Turkey market. Investors have to be careful against the fact that foreign banks have effectively imprisoned their assets by preventing government banks from offering any liquidity to non-domestic customers, as they did last month.
In my opinion, if our Central bank wants to make a real impact on the lira, it should raise the indicator rate and show that the country is willing to fight inflation in circulation. This also seems unlikely and they are not willing about it either, but at least I hope they will try it for now.
Last month, the monetary policy commission removed a commitment to revisit its rates. At the press conference on April 30, they stressed that it is still possible to take another hike.
The subsequent weakening of the currency shows that investors have a different perspective.
As a result :
Policy makers have to stop getting involved in money markets.
2- It seems that the lira will return to the deep depression that fell in the political crisis of last year until it started to increase the benchmark rates in general.

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