I think it could not have been better to finish 2013 by year end note mentioning that TRY has been catching up with INR in the most 'Battered EMFX League 2013'
The midyear year report was the tip of the ice berg and highlighted major weekly formations indicating a bullish breakout. Later on in last quarter again the pennant formation was highlighted on Nov 13th accompanied by my tweet on Nov 26th.
The most striking feature was my stat arb was heavily bearish across the board TRY against EUR, USD and MXN. Infact stat arb went long MXNTRY on 17th Dec " 0.1571 as tweeted and is up approximately 5% since then.
Just name is fundamentally, technically and statistically the TRY was doomed . Classic example how fundamentals reflect first in prices and charts and depicted/interpreted later. TRY is in real trouble . Economists have argued real interest rate is substantially lower relatively to other EM however what is/was underestimated is the political risks building up in Turkey.
Turkey's Muncipal elections and fate of Erdogan regime . Winter sets in to Turkey and should keep the CA under pressure due to Crude imports.. ( Just intuitive haven't gone that deep into statistics ) and Fed's taper game all point to a negative TRY. Lastly TCMB in order to raise rates has to ovecome the pressure from Turkish higher interest rate lobbies ahead of the elections which would put the banks credibility at threat.( if it fails to do so)
Personally think TRY will remain under substantial pressure relatively against the remaining EM until 1st Quarter 2014 and should appeal to macro traders to add in the short basket against other EM/DM basket longs.
Also a little disappointing was Long EURHUF and EURINR which have not moved as I expected but the losses are little and gains are more and that is what matters. So will keep an eye on this pairs and update accordingly.
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