USD/TRY: No reason to believe that the accelerating Lira weakening trend in recent years will change – MUFG
President Erdogan is on course for a narrow victory in the Presidential election. Economists at MUFG Bank expect the Turkish Lira to weaken.
Turkey elections results favour status quo outcome
“The election results favour a continuation of status quo in Turkey, and is unlikely to trigger the return of foreign investors back to Turkey.”
“We would expect policymakers in Turkey to maintain a relatively stable TRY in the near-term ahead of the likely second-round election. After the elections are over and the dust has settled, a continuation of unconventional policy settings, an elevated current account deficit, elevated inflation and dwindling FX reserves all point towards a weaker Lira.”
“Over the last five calendar years, the TRY has depreciated against the USD on average by -26%. So far this year the pace has slowed down ahead of the elections with the Lira falling more modestly by only -5% year to date. It leaves room for catch up weakness ahead. We see no reason to believe that the accelerating weakening trend in recent years will change if unconventional policies remain in place.”
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