USD/TRY to race higher towards the 19 level – TDS

The Turkish lira is again the worst EM FX performer to the dollar so far in 2022. Economists at TD Securities expect the USD/TRY pair to push towards 19.00 in the coming weeks.

CBRT still dragging its feet on monetary tightening

“The recurrent patterns of TRY conversion into FX deposits suggest that Turkey's dollarization will continue in the months ahead, after a brief reversal in January and February. This should remove the little support the lira has enjoyed earlier this year, and help it sink towards 19.00 vs USD.”

“The CBRT is unlikely to hike interest rates for now, leaving them on hold at 14% for yet another time on 23 June. The summer months, historically prone to causing currency crisis in weak economies, may however force the CBRT to review its position and start moving nominal rates higher.

“We still expect a total of 1,400 bps of tightening in three consecutive months. We only expect this to start in July instead of June now.”