HSBC - "Long TRY vs. 50/50% EUR/USD basket
We continue to run long TRY vs. the 50-50% EUR- USD basket. After having spent over USD 6bn of its FX reserves, Turkey’s central bank has decided to raise its lending rate, i.e. the upper end of the interest rate corridor. The defence of the TRY plays a crucial role for the CBRT as it constitutes one of the key channels to achieve its objectives. Further rate hikes are likely and will be TRY-supportive.
Long RUB vs. basket
We recommend buying the RUB vs. the 0.55- 0.45c EURUSD basket. The sharp RUB sell-off has cheapened the RUB. The RUB’s real effective exchange rate has fallen by about 5% in the past two months. Even taking into account the negative seasonal impact on the current account, the depreciation appears excessive.
This month we have opened a short CZKHUF position. In essence this is crossing the risk of Czech intervention to weaken the CZK against the excessive weakening of the HUF. We consider that the risk-reward favours being short CZK, as a vote for the motion on FX intervention will likely have dramatic consequences for the CZK. We believe it is best to go long the HUF due to the recent price action rather than the more vanilla EURCZK."