TRY
Fading prospects of a rate cut before year-end have helped limit downside momentum for TRY recently, with the lira the only major emerging market currency to have recorded spot gains versus the USD on a month-to-date basis (see chart below). A close at current or lower levels for USD/TRY would mark the fourth consecutive session of losses for the pair – and seventh close lower in the past eight trading days – its longest losing streak since July.
- A hawkish adjustment to the CBRT’s policy statement could therefore underpin continued lira outperformance, with overnight implied TRY yields, currently at 45%, slightly above the year’s average. However, prospects of a stronger TRY are not being reflected in options markets, with the USD/TRY vol skew still showing significantly in favour of calls.
- Commerzbank note that the lira has fluctuated more like a free exchange rate over the past couple of months – which probably reflects less intervention by policymakers and more integration with free world markets. Still, in their view, the medium-term trend of the lira exchange rate remains that of gradual depreciation: Commerzbank’s end-2024 forecast for USD/TRY is 34.50.
- On the other hand, JP Morgan noted earlier this month that real onshore deposit rates are set to stay higher for longer amid delayed CBRT rate cuts, keeping them bullish on TRY.
Source: MNI/Bloomberg
218 words