Oct 28 (Reuters) - This is a question asked frequently as the lira continues to make record lows, and one mentioned in a client note from Commerzbank on Wednesday.
Commerzbank recognise there's no sense in trying to guess where USD/TRY will stay capped. But it sees no reason why it couldn't get to 9.00 in coming weeks or months, a level consistent with our own technical analysis .
However, after several ifs and maybes, Commerzbank concludes USD/TRY could even overshoot 9.00 in coming weeks. Rate increases by the central bank would no longer act as a credible long-term policy response, it said, but gets the sense that a large emergency rate increase might be the only policy response in an attempt to break the momentum.
The usual partial capital controls via tightening of regulatory limits on exposure are also likely, Commerzbank said, but the medium-term resolution to the underlying problem remains unclear because policymakers deny the problem in the first place.
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(Richard Pace is a Reuters market analyst. The views expressed are his own)
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