UniCredit Revise TRY Forecasts Higher

UniCredit lower their FX forecasts for TRY due to recent TRY strength and support from the hawkish CBRT as well as boosting their year-end interest rate forecast to 13% from 12%. They write that the CBRT intends to reinforce its commitment to maintaining a sufficiently high positive real interest rate until the 5% inflation target is reached, which would be in 2023, according to the CBRT's own projections.

• In 2H21, expected rate cuts could attract additional foreign flows into the local bond market, while better tourism revenue over the summer would also support the TRY. However, the final quarter might prove more challenging due to the adverse seasonality of the current account balance and higher refinancing needs.
• UniCredit revise their USD/TRY forecasts from 7.90 to 7.25 for the end of this year and from 8.84 to 8.10 at the end of 2022.