A win by the “Remain” campaign in the tomorrow’s UK referendum would likely lead to outperformance in emerging market assets, including TRY, and produce lower USDTRY volatility, thereby causing this trade to underperform.

Additionally, more dovish rhetoric from the FOMC may push back further the market’s anticipated timing of Federal Reserve hikes, and help EM currencies to rally, while dampening currency volatility.

Strong net inflows into Turkish government bonds over the coming months would also help TRY to strengthen, leading to deterioration of the recommended position.

Furthermore, this trade may underperform if the CBRT turns more hawkish than expected and refrains from additional cuts to the upper overnight lending rate at the upcoming rate-setting meetings.

As the long term trend is in favour of the bulls but during Bremain scenario IVs are likely to fade away, stay long in mid-month future, an investor uses these futures contracts to hedge against foreign exchange risk. If an investor receives a cashflow denominated in a foreign currency on some future date, that investor can lock in the current exchange rate by entering into an offsetting currency futures position that expires on the date of the cashflow.