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- USD/TRY: Prepare for strong volatility down the road once again – Commerzbank
USD/TRY: Prepare for strong volatility down the road once again – Commerzbank
The USD/TRY pair has been stuck in an unnaturally narrow range near the 26.95 mark since after the last central bank meeting (on 20 July). Economists at Commerzbank analyze Lira's outlook.
Volatility of the Lia abruptly evaporated
The price action of the past week strongly resembles what we had witnessed during the preceding era of FX intervention and Lira support by local banks (at the cost of their own balance sheets). This seems to be the only explanation for why volatility of the TRY abruptly evaporated.
As in the past, such FX intervention inevitably destroys FX reserves and proves to be unsustainable, after which things lead to equally strong volatility down the road. We have to get prepared once again.
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