USD/TRY aims to 3.55 in the near term – Danske Bank

Strategist at Danske Bank Vladimir Miklashevsky expects the Turkish currency to gather extra traction within a month’s view.

Key Quotes

“We expect the central bank to keep its key rate unchanged in the near future due to pressure from the government, while continuing to tighten liquidity for local banks providing largely FX repos to stabilise the TRY further”.

“The TRY moved closer to its ‘fair value’ as Turkey’s central bank started tightening liquidity in order to support the TRY and calm down inflation declaring that the central bank could tighten further, if needed, triggering some unwinding of heavily short TRY positions. Local politics weigh less on the currency, as President Recep Tayyip Erdoğan has brought more clarity on the referendum on Turkey’s presidential power. The referendum could be held on 16 April 2017. Renewed fears of an upcoming Fed rate hike in 2017 and concerns about a greater-than-expected slowdown in the economy could push the TRY further away from ‘fair value’.

“We cut our USD/TRY short- and medium-term forecasts to 3.55 in 1M (3.95), 3.70 in 3M (4.15), and 3.85 in 6M (4.25), while keeping the long-run unchanged at 4.50 in 12M”.