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Markets See More Turkish Lira Losses-And Huge Central Bank Action

New York Times

Shorter-term one-month risk reversals indicate even sharper stresses, while one-year forwards are quoted at a 15 percent premium to the current dollar/lira spot rate. The signals from Turkey's interest rate markets are tricky to decipher with any accuracy in the current maelstrom, but the picture that emerges is that a monster rate hike to try and halt the lira slide is being priced in. Three-month 'forward starting swaps', an indicator of what money markets expect to be charging for three month-funding in three months' time, are 23.8 percent, well up on Turkey's current central bank main interest rate of 17.75 percent. Central bank "credibility is damaged already so they would have to go big," said Tilmann Kolb, an analyst in the Chief Investment Office of UBS Wealth Management.