RUB is often highlighted as a beneficiary of a potentially more amiable foreign policy stance towards Russia under Trump. Although clarity on this will not likely be forthcoming for months to come, RUB’s fundamental strengths should lead to an outperformance against TRY and ZAR.

Trump’s energy policy may result in downside pressure on oil prices eventually, and we think this poses a greater risk to RUB than any upside from a favorable foreign policy treatment. For now, though, there is sufficient uncertainty on this front, leaving us OW RUB.

With the deterioration in the local political situation and a less supportive environment from higher G3 yields, the outlook for the lira is worsening, in our view.

Going forward, the absence of local FX selling in the coming weeks could render USDTRY a lot more volatile than the market has grown accustomed to, in our view.

The central bank has expressed concerns over the currency, suggesting it would not cut rates further without FX stability, but we doubt this is enough to stabilize the lira.

While the CBRT could conduct FX sale auctions or release FX liquidity from its FX liabilities like it did last week, we think the impact of these measures would be modest, and so we do not expect the central bank to be particularly proactive with its toolkit to stabilize the lira in the interim.

We find option exposure most attractive at present on account of the ATM vols impulsive responses, with implied volatility and skew trading near their lowest levels in a year when we entered our USDTRY call on 7th November (USDTRY vol has recently spiked higher following the global risk-off after the US election results, see above chart).

In outright trades, we maintain longs in USDTRY 1m15d debit call spreads, complementing above aspects and IV shift, the position reduces the hedging cost almost close to 50%.