Morten Lund, analyst at Nordea Markets, points out that the Turkish lira is yet again in trouble as it plummeted around 5% intra-day against the USD last Friday, reminding investors of just how fragile the currency still is after last year’s bloodbath.

Key Quotes

“The crash was in our view to a large extent driven by comments from President Erdogan, who slammed FX analysts for “misleading predictions” on foreign exchange rates, which in turn spread fear amongst market participants that Erdogan could once again direct his focus towards the TRY and the central bank’s doing.”

“If, however, President Erdogan is right and FX analysts really are the drivers behind the TRY’s sluggish performance, then we are guilty as well and have been so for a while.”

“In sum, we do not see many TRY-positive arguments in the current environment – neither from a domestic nor an external perspective. We expect the Turkish economy to keep struggling in the coming quarters and with unusually elevated uncertainty about the inflation outlook, we see a high risk that the CBRT may move too early. Therefore, we keep our negative view on the TRY in both the short and long run, with a decent risk probability of the TRY weakening more than forward.”

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