Lira sell-off and lessons from other “sudden stops”

The fresh falls in the Turkish lira following the CBRT’s interest rate cut today have left Turkey firmly in crisis territory and echoes of previous “sudden stops” during major EM currency crises in the past are growing louder. Without an aggressive policy response, there is a real risk of large and destabilising falls in the lira of more than 10%, with the currency bursting through 13/$ in the coming days. In view of the wider interest, we are also sending this Emerging Europe Update to clients of our FX Markets service.