CBRT expected to hike rates in December – TDS

FX Strategists at TD Securities see the Turkish central bank raising rates by 100 bps at its December meeting.

Key Quotes

“The CBRT may be close to a breaking point as USDTRY approaches the 4.00 handle. Rate hikes seem unavoidable and imminent. Presidential advisers warned that the Bank may act soon, with independence, and does not have to wait for the 14 December scheduled meeting. We accordingly change our forecast and now expect a 100bps hike of the WACF to 13.25% by December”.

“The current lira sell-off that started in September has already pushed TRY 14% weaker vs. USD. We see similarities with previous episodes of lira mini-crises. We think USDTRY is set to invert direction soon; however we remain wary of the possibility of further upside moves. In our model portfolio, we open a limit order for a short USDTRY position at 4.10 with target of 3.75 and stop at 4.25”.