TRY keeps the bearish view intact in the longer run – Danske Bank

Pablo Piovano FXStreet

Senior Economist at Danske Bank Vladimir Miklashevsky keeps the bearish view unchanged on the Turkish Lira.

Key Quotes

“Turkey’s central bank (TCMB) surprised the markets with a 625bp hike of the one-week repo rate to 24.00%, which moved USD/TRY to new lower levels and helped EM FX across the globe. We expected a 300bp hike and Bloomberg consensus anticipated a 325bp increase. In its most recent statement, the TCMB signalled that ‘if needed, further monetary tightening will be delivered’. Given the continuing acceleration in inflation (+6.62pp to 24.52% y/y in September) and risks of more weakening in the TRY, another hike is possible in Q4 18, as the real rate has become negative”.

“We maintain our USD/TRY forecast levels. Given that we expect more tightening fromthe TCMB (both implicitly and explicitly), we see only a moderate rise in the USD/TRY in the long term. A rate hike in Q4 18 would boost TRY’s short- and medium-term prospects. However, we continue to remain bearish on the TRY in the long term and forecast the USD/TRY at the following levels: 6.00 in 1M, 6.40 in 3M, 6.90 in 6M and 7.50 in 12M”.

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

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