USD/TRY has been depreciating continuously like pulled along by a piece of string since last autumn. Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, believes that the fact that the speed of the depreciation has been accelerating recently is a warning sign.

The longer it hisses, the louder the boom

“We have frequently referred to measures implemented by the Turkish central bank and government as being a mild form of capital controls. In view of the exchange rate developments, I come to the conclusion: everything all told this policy is working in a manner that is turning USD/TRY into a managed exchange rate. The issue with exchange rate management is: it does not work long term.”

“Bretton Woods, the currency snake, EMS I. All these attempts to control exchange rate developments came crashing down sooner or later. If the imbalances become unstable, things get worse the later the control fails. I, therefore, do not take too much of a risk if I project: that is going to happen to the control of the lira exchange rates at some point.”

“The development of the TRY exchange rate illustrates one thing: the fact that the speed of the depreciation has been accelerating recently is a warning sign.”