Goldman Sachs(US:GS) 智通财经网·2025-05-29 10:58Core Viewpoint - Goldman Sachs indicates that the Turkish central bank's decision to allow the lira to depreciate against the US dollar poses risks to successful global arbitrage trades, potentially aimed at limiting hot money inflows and addressing exporters' concerns about an overvalued currency [1][3]. Group 1: Central Bank Policy - The Turkish central bank is allowing the lira to depreciate at a rate exceeding typical levels, which may be a strategy to curb capital inflows [1]. - The report suggests that the central bank may have decided to stop increasing reserve requirements to counteract foreign exchange inflows driven by capital [1]. - The current depreciation of the lira contradicts the central bank's target to reduce monthly inflation from approximately 38% last month to 24% by year-end and to 12% by 2026 [3]. Group 2: Market Reactions - Following the arrest of Istanbul Mayor Ekrem İmamoğlu, a popular presidential candidate, the value of the lira has been negatively impacted, exacerbating inflation and prompting the central bank to halt its interest rate cuts initiated in December [3]. - In May, the lira depreciated by about 1.6% against the dollar, following a 1.4% decline the previous month, indicating a trend of weakening currency [3]. - The reliance on external markets has become a disadvantage, as international investors sold off lira assets after İmamoğlu's arrest, further intensifying market turmoil [4]. Group 3: Liquidity Management - The Turkish central bank's liquidity management has become complicated due to the influx of funds, which it has used to increase reserves while injecting billions of lira into the financial system [4]. - The central bank faced a situation of over 1 trillion lira in excess supply, posing a threat to its strict monetary policy [4].