TRY seen under pressure near term – Danske Bank

Senior Strategist at Danske Bank Vladimir Miklashevsky assessed the prospects for the Turkish Lira.

Key Quotes

“Accelerated inflation has postponed hopes of near-future monetary easing and is keeping the central bank hawkish despite pressure by President Recep Tayyip Erdoğan. On 14 September, the Turkish central bank kept all its policy rates unchanged, and we expect the benchmark repo rate to remain unchanged in H1 18, given the current inflation outlook and the TRY’s turbulence”.

“We see weaker prospects for the TRY in the short term as carry trades become overcrowded and we believe any weakening could cause a mass exodus. Carry trade longs in the TRY have created a bottleneck as local FX liquidity has become squeezed. We remain cautious in the medium to long term”.