In light of recent event, analysts at Danske Bank raised their short-term forecast for USD/TRY but keep unchanged mid and long-term projections.
“The TRY has been hit by a combination of expansionary domestic policies, a structurally weak current account position and large corporate and household external FX position, coupled with uncertainty about
“Given the sour sentiment in emerging markets globally, a 300bp hike could be a temporary measure to halt TRY’s rapid depreciation. Thus, we do not exclude another tightening at the monetary policy meeting on 7 June. The USD/TRY rate is a very important ‘wealth’ indicator for ordinary Turkish voters and any approach of the currency pair to 5.00 would trigger another emergency rate hike ahead of the election, we believe similar to yesterday’s hike.”
“While we have been bearish on the TRY for several years, in 2018 the currency was hit by a perfect storm, where both macro fundamentals and global environment, local politics and geopolitics, net reserves and portfolio flows stroke