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Turkish Lira Soars Over 1000 Pips In Hours On Central Bank Intervention Suspense

Tyler Durden's picture




 

As we noted earlier, the "surprise" factor of the Turkish Central Bank's (CBT) emergency meeting is seeming to have the desired effect as the Lira has rallied over 1000 pips since the announcement. Officially there has been no intervention and, despite Erdogan's political pressure on the CBT not to raise rates (because of the "interest rates lobby") Barclays (as we noted here) and most other banks are expecting more conventional dramatic interest rate hikes (since everyone knows the FX reserves are running dry):

  • *TURKEY NEEDS TO RAISE O/N RATE 300BPS FOR MKT EFFECT: JPMORGAN

However, JPMorgan adds that it "strongly doubts this will regain investors confidence" and Finansbank warns it has "significant doubts" that the CBT will deliver. And this is what the rest of the market thinks...

 

 

Goldman Sachs (Ahmet Akarli, Kasper Lund-Jensen)

Turkey to begin “clear, decisive” tightening cycle tomorrow, other measures may include draining TRY from system, adding FX liquidity or FX swap lines

Capital controls unlikely at this stage after short-lived attempt to introduce Tobin tax in 2006

It is not exactly clear how the CBRT will play its hand at this juncture. Our best guess is that tomorrow's MPC meeting will mark the beginning of a clear and decisive tightening cycle. Although our current forecast is for the non-PD O/N lending rate to reach 10% (from the current 7.75%) by end-year, it is not clear how far the policy adjustment needs to go to stabilise the TRY and prevent additional under-performance relative to EM peers. More substantive tightening may ultimately be necessary given Turkey's large external imbalances, high and accelerating inflation and the CBRT's weak inflation credentials. Here, consistency and credibility of the CBRT's policy decision will be crucial

Nomura (Olgay Buyukkayali)

Sees “meaningful hike” and a “more simple policy” adopted at tomorrow’s meeting

Marginal funding rate to rise 200bps to 9.75%, with hawkish bias, policy makers to keep this as only funding rate for next few mos.
 

Standard Bank (Timothy Ash)

Needs 300bp rate increase to shore up TRY, with more to come

Finansbank (Inan Demir)

Finansbank has “significant doubts” that the central bank of Turkey will deliver substantial tightening at an extraordinary meeting tomorrow, citing its “less than perfect” track record in responding to routs of the lira, according to chief economist Inan Demir.

In 2006, cenbank declined to raise rates at monthly meeting then held extrardinary meeting to announce 175bp rate increase, which failed to stop lira decline and was followed by another emergency meeting with a 225bp increase: Finansbank

In Oct 2011, cenbank raised upper rate 350bps to 12.5%, but continued to fund market at lower, 1-week repo rate, leaving currency under pressure: Finansbank

JPMorgan (Yarkin Cebeci)

Overnight lending rate may rise to 9.75%

“Strongly doubt” that this would suffice to regain investor confidence

Turkey needs to raise overnight rate 300bps for desired market impact if it keeps so-called interest rate corridor at tomorrow’s extraordinary monetary policy meeting, Yarkin Cebeci, an analyst at JPMorgan Chase & Co. in Istanbul, says in e-mailed report.   * Bank may shift interest rate corridor, or push upper end by     200bps, bringing overnight lending rate to 9.75%

Given “uncertainties that would persist, we strongly doubt that this would suffice to regain investor confidence”:

“Central bank could be forced to deliver further hikes in the coming weeks”

Deutsche Bank (Alan Ruskin)
    * Market looking for “serious” interest rate hike

UBS (George Magnus)
    * Timing suggests something other than rates adjustment, may announce capital controls
    * CBRT has been under pressure not to raise rates; Erdogan remarks that current events part of an international rates conspiracy

Capital Economics (William Jackson)
    * Increase in overnight lending rate to 9% “most likely outcome,” although unclear whether bank will be able to defy government pressure not to raise rates
    * Bank appears to have lost credibility with market

  * Societe Generale (Benoit Anne)
    * Rates need to rise by at least 100bps, ideally 200bps
    * Expects other central banks to also step back into FX market, including Brazil BCB and India RBI

  * BBH (Marc Chandler)
    * Capital controls are a possibility, could take “many different forms
    * 100bp rate increase would be ‘‘nice,’’ market would press for more

 

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Mon, 01/27/2014 - 12:46 | 4371373 ParkAveFlasher
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Park Ave Flasher
    * Gold, bitchez!

Mon, 01/27/2014 - 12:53 | 4371385 camaro68ss
camaro68ss's picture

bought me some more gold this weekend! f*** this market!

the only way to win is not to play

Mon, 01/27/2014 - 13:11 | 4371453 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Some trader lost his shirt today. Let the contagion spread!!

Mon, 01/27/2014 - 13:20 | 4371493 Grande Tetons
Grande Tetons's picture

Another trader is wearing two shirts. 

Mon, 01/27/2014 - 12:55 | 4371401 Cookie
Mon, 01/27/2014 - 13:09 | 4371427 ebworthen
ebworthen's picture

Funny how those gumshoes don't go after HSBC or the other TBTF banks for money laundering.

Wonder who they work for?  Certainly not the people.  Worthless dicks.

Mon, 01/27/2014 - 13:50 | 4371618 Toolshed
Toolshed's picture

The CB's will simply not tolerate competition. Period. Crime is ok on the other hand, as long as it is profitable for the banks and regulators. And, apparently, money laundering is a banking industry staple.

Mon, 01/27/2014 - 13:44 | 4371592 Toolshed
Toolshed's picture

Shocking development!!!! Who could have possibly seen this coming?

/sarc off ;)

Mon, 01/27/2014 - 12:50 | 4371383 Gringo Viejo
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Watching this global unraveling I'm reminded of the scene in Blazing Saddles where Sheriff Bart upon arriving in Rockridge and facing all the guns pointed at him.....then takes out his own pistol, points it at his head and says.....
"Hep Me! Hep Me!"
Which begs the question by Mrs. Johnson....

"Isn't anybody going to help that poor man?"

Mon, 01/27/2014 - 12:52 | 4371392 adr
adr's picture

More like the fake town they built, looks real on the surface but completely fake once you really look at it.

Mon, 01/27/2014 - 12:54 | 4371399 TeamDepends
TeamDepends's picture

Do what he says, do what he says!

Mon, 01/27/2014 - 12:51 | 4371386 adr
adr's picture

I love how a central bank doesn't even have to do anything to rally the market, they just have to say they will do something. It did wonders for Europe last year, has anything actually been done?

If I tell the bank that I'm thinking about paying my mortgage, will the balance go down?

Mon, 01/27/2014 - 13:05 | 4371420 Bearwagon
Bearwagon's picture

The farce can have great influence on the weak-minded.

Mon, 01/27/2014 - 12:51 | 4371388 i_call_you_my_base
i_call_you_my_base's picture

Better be good.

Mon, 01/27/2014 - 12:51 | 4371389 TeamDepends
TeamDepends's picture

We flipped a coin and have decided to go all in with Vietnamese Dong.

Mon, 01/27/2014 - 12:53 | 4371390 kliguy38
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We're SERIOUS.........really this time we're REALLY serious.........seriously

Mon, 01/27/2014 - 12:54 | 4371397 maskone909
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like al gore says

im super cereal

Mon, 01/27/2014 - 12:53 | 4371393 W74
W74's picture

I don't have a currency trading background so I had to look up what Pips were.  Perhaps I'm wrong but a 100 pips would be a 1% move?  So then 1000 pips would be a 10% move?

Mon, 01/27/2014 - 13:18 | 4371478 BearTrap
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No. As you can see from the price chart the move was from 2.39 to 2.29, roughly. This is a 1000 pip move.

In percentage terms it will be something like 4% (0.1/2.39).

 

Mon, 01/27/2014 - 13:04 | 4371414 SheepDog-One
SheepDog-One's picture

Jamie Dimon notorious head crook crypt keeper speaks advice to others from the Morgue....holy shit.

Mon, 01/27/2014 - 13:03 | 4371417 ebworthen
ebworthen's picture

What's all this talk of raising overnight lending rates?

Isn't the FED happy to provide the TBTF banks all they need at 0.05%?

Where are the calls for the FED to charge 9% on overnight rates?

Oh right, the banks own the FED, nevermind.

Mon, 01/27/2014 - 13:06 | 4371421 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

That looks like a standard day of volatility in bitcoin markets.

Mon, 01/27/2014 - 13:08 | 4371424 Yen Cross
Yen Cross's picture

     I blew all the tanks Captain...She's taking on water too fast...

  I've seen some big moves in F/X, and this was a big move!

Mon, 01/27/2014 - 13:35 | 4371557 Quinvarius
Quinvarius's picture

NATO member.  Part of the US controlled Western Central Bank FOREX cartel.  And it is just a number on a screen.  The price can be set anywhere by the printing presses.  All Western FOREX is the same thing in the end, as long as the CBs cooperate. 

Mon, 01/27/2014 - 13:58 | 4371669 QQQBall
QQQBall's picture

So they either drain the system or inject liquidity... Either way, I TOLD YOU SO. 

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