By Tugce Ozsoy
(Bloomberg) — Analysts at HSBC and Morgan Stanley expect the lira to depreciate in the aftermath of Turkish elections on May 14, no matter who wins the ballot.
In reports dated April 5, both banks said a significant weakening in the Turkish currency is likely. HSBC raised it year-end forecast to 24 lira per dollar, from an earlier anticipated 21, citing deteriorating fundamentals.
“The question for us is not if the TRY will weaken in the coming months but rather by how much it is likely to adjust,”
HSBC strategist Murat Toprak wrote in the report.
Traders see the outcome of the elections in May as crucial in determining the country’s monetary and fiscal paths after years of unorthodox policies under President Recep Tayyip
Erdogan that have alienated foreign investors. The government has kept tight control over markets in past years in an effort to keep volatility in check.
Lira likely “faces a steeper front-loaded adjustment” than originally expected, should the policy framework change following the elections, Morgan Stanley economists and
strategists, including Hande Kucuk, wrote in the report. “In the case of policy continuity, an FX adjustment may not be avoidable, but will likely be back-loaded.”
Market Metrics
* USD/TRY little changed at 19.2619 as of 12:02pm
* 5-year CDS +3bps at 554bps
* Borsa Istanbul 100 Index +0.5% to 4,919.87
* U.S. Treasury 10-year bond yield -3bps to 3.28%
* Brent crude -0.5% to $84.59 per barrel
Key News:
* Turks With Dollars to Sell Head to Bazaar to Nab Premium Rate
* Turkey Sells First Green Bond as High-Stakes Elections Loom
* PRICED: Turkey $2.5B Long 7Y Green to Yield 9.3%
To contact the reporter on this story:
Tugce Ozsoy in Istanbul at [email protected]
To contact the editors responsible for this story:
Onur Ant at [email protected];
Ksenia Galouchko at [email protected]
Wojciech Moskwa
