The Turkish lira has been the ugly duckling of EM currencies this month as fears grow over the country’s coronavirus outbreak and poor external position. Turkish banks’ short-term external debts are large and a heavy repayment schedule over the remainder of this month will provide the first real test of banks’ ability to repay their liabilities. While the recent bout of lira weakness is likely to persist, it should not prevent the central bank from cutting interest rates next week. Meanwhile, the market dislocation elsewhere in the region has been much smaller than in previous periods of crisis which owes itself to the improvement in macro fundamentals in recent years.
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