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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.”