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Reuters: dollar under pressure – paraanalysis

After inflation in the markets reached its peak for about 2 years, the statements and actions of the Central Bank (CBRT) will be followed, while the global markets that will return to normal transactions from the holiday will be watched today. The dollar / TL is still between 8.1060-70.

Asian stock markets rose as other strong US economic data supported global forecasts, while currency and bond markets halted after a rapid month-long rise in US dollar and bond yields. American Treasury.

While the yield on the benchmark 10-year US Treasury bond was flat in New York trading, it fell two basis points to 1.6860% in the Asian session.

The dollar index fell 0.4% to its lowest level since March 25, while it fell further in Asian trading in the morning. The dollar index fell to the level of 92,668.

Annual consumer inflation rose to the highest levels since mid-2019 at 16.19%, and the increase is expected to continue in the coming months. In this context, the discourse and actions of the CBRT on rising inflation are closely followed.

Economists predicted that in the scenario where there is no new currency effect, inflation will see its highest level of the year in April and then decline towards the end of the year. However, it seems that these expectations will be revised in the next few days due to the exchange shock with the change of president in the CBRT.

In the reviews, it is highlighted that the expected inflation peak in April will increase even more, the peak will extend to the months after April, inflation will remain high for a longer time and the expected fall will continue to be more limited.

The main developments to be monitored this month include the CBRT interest rate decision meeting on April 15 and the inflation report at the end of the month, when markets anticipate there will be no rate cuts this month.

The operator of a bank’s foreign exchange desk said: “When we look at the inflation-interest ratio, the April data does not require a further rate hike. However, the fact that producer price inflation exceeds 30% will also be reflected in consumer prices and the depreciation of the LT are important risks that will affect inflation. Markets are trying to understand whether the point where inflation will rise in the next few months will reach the point where perhaps a new rate hike will reach the point, “he said.

“The market anticipation that the CBRT will not be able to raise interest rates after the current changes may put the TL under great pressure to a point where it is understood that the 19% policy rate will not be enough. Other than that, the most important issue is US interest rates. Concerns about a similar scenario to 2013 put pressure on TL and similar currencies. We also see that the trend of locals to sell foreign currency continues, although it has slowed down compared to recent days.

The CBRT, led by Naci Ağbal, increased the policy rate by 875 basis points in less than five months, causing the lira to appreciate. According to the bankers, the fact that the policy rate is 19% continues to constitute important support for the TL.

But Erdogan suddenly deposed Ağbal, rather than his own, as higher interest rates participated in the view that the cause of inflation Shahab Kavcıoğlu the allocation, discharged early will be of interest in the markets and the hidden tightening on growing concerns that a return to method unusually brought to the brink of a new currency crisis in Turkey.

Kavcıoğlu’s commitment to stick to tight monetary policy last week and falling US Treasury yields fell below 8 on Friday. However, the dollar / TL could not hold at these levels. The closings of positions of foreign investors due to holidays, volume decreases and the increase in the weight of national investors in transactions were effective in this decrease. After the flow of national news and the surge in US bonds again, the dollar / TL started the day around 8.2.

They made a part of Ağbal the president of the Central Bank of about $ 20 billion in the period when foreign and local investors trade after the president changed direction, the production of 230 billion dollars in Turkey increased its presence as currency assets of TL $ 10 billion. According to the information provided by the bankers, the locals are still active this week in both buying and selling currencies. Bankers say that transactions continue to weigh on currency sales.

According to QNB Finansbank Research, while depreciation pressure on the TL eased with the recovery of global risk appetite, the USD / TL declined and started this morning at 8.12 levels. Turkey reached the 5-year CDS premium of 450 basis points. The interest on the 2-year bond, on the other hand, reached a flat rate of 18.56%.

According to our calculation from the analytical balance data, the CBRT’s gross foreign exchange reserve decreased by $ 3.2 billion in the week of April 2 to $ 87.5 billion. USD 1,100 million of this decrease is related to the decrease in reserves held by banks within the scope of mandatory reserves, guarantee deposits and reserve option mechanisms in the CBRT. Accordingly, we estimate net reserves at $ 10.7 billion with a weekly decrease of $ 2.1 billion. During the analyzed week, the amount of swaps made by banks with the CBRT remained stable at USD 42.7 billion. The $ 2 billion Eurobond redemption on March 30 appears to be the main reason for the decline in net reserves.

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