Turkey’s Lira Set to Sink 40 Percent by 3Q, TD Securities Says

News About Turkey - NAT
2 Min Read
A 10 Turkish Lira banknote Photographer: Chris Ratcliffe/Bloomberg

 

TD Securities is defying market consensus to predict another crisis in Turkey’s lira.

The Toronto-based investment house has reiterated its call for a whopping 40 percent depreciation to an all-time low of 8.90 per U.S. dollar, according to a report published Friday. This is in contrast to the increasingly sanguine view among traders, who see the currency drifting less than 8 percent weaker by the third quarter.

Cristian Maggio, the head of emerging-market strategy at TD, who initially penciled in a sharp sell-off for the first quarter, says “circumstances have convinced” him this will still happen, though not before the second quarter. He maintains the central bank will have to raise rates by 400 basis points between June and July, in “stark contrast” to a market that expects cuts of some 650 basis points this year.

“The typical pattern is for the lira to go from one crisis to the next one, with stints of relative tranquility in between,” Maggio said. “We think we currently are in one of those stints.”

Lira will come under pressure from a deepening economic contraction, upside risks to stubbornly high inflation, a wide balance-of-payments gap, a “bleak” outlook for the nation’s banks which face a mounting pile of bad loans, and a “de facto dollarization” of the economy.

The tumult over the summer whipped a third off the lira’s value and left borrowers who binged on foreign-currency debt over the years struggling to repay their loans. The central bank responded by raising rates by 625 basis points in September, ushering in a period of calm in the currency. The lira has mostly traded in a narrow band between 5.15 and 5.35 per dollar all year.

Source: Bloomberg

TAGGED:
Share This Article
Founded by a small group of Turkish/Kurdish scholars who have been subjected to persecution at the hands of the Erdogan dictatorship, News About Turkey (NAT) has emerged as a platform that is both exceptional and invaluable. Our objective is to provide you with a comprehensive and sophisticated understanding of the events and developments in Turkey (Türkiye), a country with profound historical and geopolitical importance, a vibrant culture, and a strategic location. Our founders, who have been purged by the Erdogan regime after the so-called coup attempt, are aware of the significance of journalism that is both free and independent. Because of this understanding, we are committed to providing reporting and analysis that is both objective and comprehensive. To give you the most thorough coverage of Turkey, we go further than just scratching the surface. Keep in touch with us so that you can have a better understanding of Turkey's developing story as well as vital and comprehensive news items. Whether you are a resident of Turkey, a member of the Turkish/Kurdish diaspora, or simply someone who has a strong interest in this vital country, we are the most reliable source for news that not only informs but also inspires and engages you.
Leave a comment