"Turkish local rates continue to push higher-RBS
RBS - 10.02.2011
RBS reports that EM credit has tightened back somewhat since the lows of last week, and we have also seen some stability across FX space, but rates continue to push higher as the over-riding message - perhaps reinforced by political instability out of the Middle East - seems to be that monetary authorities across Emerging Markets need to deal more effectively with inflation. In the Middle East that probably means fiscal pump priming to cover increased food subsidies. Elsewhere, it probably means rate hikes and perhaps even an increased willingness to allow currency appreciation - it is easier arguably now to allow some currency appreciation given that the QEII-inspired wall of money into EM is easing back. Turkey does not fit into the latter camp, as it is still struggling with a large current account deficit, weak CA financing (lack of FDI) and a central bank which is still keep to cap FX upside as reflected in the continued presence in the market of the CBRT to provide FX liquidity. "
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