ING views CBRT's return to repo auctions as positive for the Lira

ING Global evaluated the decision announced by the Central Bank of the Republic of Turkey (CBRT) over the weekend to resume one-week repo auctions as a positive development for the Turkish Lira.

According to the institution's assessment, this step means that CBRT funding is shifting from the 40 percent overnight lending rate toward the 37 percent policy rate. ING recalled that one-week repo auctions were suspended following the start of the US-Iran conflict in early March, and that this practice effectively created an additional tightening effect of 300 basis points.

ING stated that the return to a more traditional funding policy indicates that the economic management's confidence in the outlook has increased.

Reporting that a decline was observed in the short-term implied interest rates of the TL following the decision, the institution assessed that carry trade investors, who anticipate the lira will perform better than forward pricing, may continue to maintain their positions.