On Thursday, September 22, the Turkish central bank surprised markets on the dovish side by delivering a second consecutive policy rate cut of 100 bps. Analysts at Credit Suisse stick to the view that the lira will continue to weaken gradually for now as the central bank prioritizes a smooth FX path.

Smooth path for USD/TRY is a priority

“Our base case for USD/TRY remains one where the pair continues to rise relatively orderly.” 

“We expect a break above the 19.00 mark to occur in the first half of the Q4.”

“We assume that the central bank will use the latest increase in its gross reserves to meet the coming balance of payments financing needs as lira stability remains a priority.” 

“Further ad hoc measures aiming to engineer a smooth path of depreciation will probably be used as a second line of defence if needed – such as a new deposit scheme that incentive locals to keep their cash in lira.”