USD/TRY: CBRT reshuffle increases risk of faster lira sell-off – MUFG

USD/TRY is on course to close higher for the fifth consecutive day. Economists at MUFG Bank expect the lira to accelerate its depreciation Turkish President sacks three Central Bank’s policymakers in a sudden move.

Lira set to weaken further 

“There is now an increased risk that lira weakness will accelerate in the near-term following the announcement that President Erdogan has fired three members of the CBRT’s rate setting committee.”

“The latest developments provide further evidence of President Erdogan’s strong influence over the setting of monetary policy in Turkey and the CBRT’s lack of independence. It will further cast doubt amongst investors over Turkey’s desire/ability to dampen upside inflation risks which will continue to erode the value of the lira.”

“The odds of another rate cut at the next meeting on 21st October have now increased even as lira weakness accelerates. In light of these developments the lira will  continue to weaken more quickly and by more than we had been anticipating.”