USD/TRY: We continue to remain bearish on the lira – Danske Bank

Analysts at Danske Bank remains bearish on the Turkish lira but they raise the medium- and long-term outlook slightly due to the currency stabilisation and a more flexible Federal Reserve.  

Key Quotes:  

“Recent net flows into Turkish bonds and stocks have been positive as a softening US Fed has improved sentiment. According to technical analysis (Relative Strength Index), the USD/TRY continues near ‘the fair value’ where it returned after the significant hike in September 2018.”

“Major downside risks to our TRY forecasts include a surprise monetary easing ahead of local elections held in March 2019, the Fed becoming more hawkish and a geopolitical confrontation in Syria.”

“We raise our TRY medium- and long-term outlook slightly due to the currency stabilisation and more flexible Fed. However, large FX debt redemptions by Turkish private sector and rate cuts will weigh on the TRY in 2019. Thus, we continue to remain bearish on the currency in the long term and forecast USD/TRY at the following levels: 5.40 in 1M, 5.55 in 3M, 5.70 in 6M (previously 6.00) and 6.00 in 12M (previously 6.25).”