Despite being the month with the best performance of the Turkish lira questyear, highlights the volatility that continues to haunt asset Turks.
For the CEO of JPMorgan Chase & Co, in Turkey, Mustafa Bagrisik, currency volatility remains a major obstacle persuading investors to buy Turkish bonds despite their attractiveness in terms of returns.
He added that the markets are in alert also in the coming months, on the trend of price growth, which has already reached the highest level in two years, according to an interview with Bloomberg.
“The predictability of inflation and the currency are the two most important things to increase the appetite for lira-priced assets,” he said. “If you can fix it, the rest will follow.”
The lira climbed 3% against the dollar in July, buoyed by US policies, with the Federal Reserve’s dovish stance and concerns over an interest rate cut in Turkey that faded prematurely. This is the best performance between emerging markets and a sharp turnaround for a currency that plunged to an all-time low at the beginning of quest’year.
However, the implied volatility of the lira over the next three months remains among the highest in the world, undermining the attractiveness of the currency’s yield. It also discourages capital inflows, Bagreasek said, which the economy needs to finance the current account deficit.
This comes as central bank governor Sahab Kavcioglu has kept the interest rate unchanged at 19% since his appointment in March, exceeding President Recep Tayyip Erdogan’s demands for a more flexible policy. This means that the lira now enjoys one of the highest nominal rates in the world in via of development.
However, foreign investors, frightened by the market downturns that followed the ouster of his predecessor, withdrew $ 472 million net from the bond market. in local currency, a sharp break that saw cumulative inflows in Securities for over $ 1.3 billion quest’year.
“If you look at similar countries like Russia, South Africa, the Middle East and North Africa, they get a lot of funding from global markets which obviously helps their growth,” Bagryasik said.
Meanwhile, inflation has risen almost every month quest’year. Rising energy costs and the impact of the reopening of the economy on everything from food to clothing drove the pace of price hikes to 18.95% per annum in July, close to the benchmark interest rate level. of the central bank.
The central bank raised its year-end inflation forecast to 14.1 percent from last week’s 12.2 percent.
“Inflation in Turkey is something that worries everyone in this moment, “Bagricaic said.” Over the next two months, markets will look to the direction of inflation for the rest of the year and, above all, to the direction of 2022. “
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