​As TL heads for a crash, does Erdogan have a strategy?

TURKEY - In Brief 27 Oct 2020 by Atilla Yesilada

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I’m writing this Market Brief at noon, when dollar/TL pair shot up to 8.15. I can’t prove it, but I fear most of the pressure now comes from domestic savers, who may be cashing their TLs for hard currency at exchange bureaus, or even withdrawing their FX deposits. The tale of the tape is simple. CBRT bypassed a chance to firm up the currency with a policy rate hike, deeply disappointing foreign investors. Afterwards, political risks exploded out of proportion. Let’s count these: Erdogan has picked up a very public fight with Macron, for several reasons, but the latest is Macron’s decsion to move against “radical Islam” in France.Today, two Turkish news sources claim Erdogan once again called Germans Nazis, yet I can’t find that particular Erdogan quote. Nevertheless, EU is clearly dismayed, with Commission President Michel calling bilateral relations at an all time low. To recall, Erdogan had urged Washington DC to impose CAATSA sanctions on Turkey over the weekend. Finally, he proposed a 2 state solution for Cyprus, which is a no-go for the Greek Side, while at least one Turkish exploration ship is active in waters contested between Turkey and Greece. These are the “pull factors” as far as political risks go. There are also “push factors”, i.e. events largely beyond his control. Erdogan is disappointed by the cease-fire agreement in Libya, probably mindful that the final deal may nix the contentious Turkey-Tripoli Government maritime demarcation agreement. As Azeri-Armenian clashes escalate further, Azeri President Aliyev admitted the presence of Turkish F-16 fighter jets in his country “against Armenian aggression” (thus admitting Turkish military support for the cam...