Turkey's disappointing trade balance likely not to effect on lira

The current-account posted $3.99bn deficit in May. An auto sector strike and volatile gold trade hit the trade deficit in May net of gold, the trade deficit too was 8% y/y wider in May; based on preliminary data, the aberration caused by the auto strikes was partly re-versed in June. 

Still, the data warn us that Turkey's narrowing current-account deficit cannot benefit forever from lower oil and commodity prices in fact, this benefit has reached its peak. 

"This is why a 4.5% of GDP current-account deficit is forecasted this year, but wider 5.2% next year", says Commerzbank. 

The breakdown of 'invisibles' shows, Increasing risk aversion by multinationals, who repatriated 22% y/y more in May; and Continuing negative portfolio flow of $2.5bn net. The lira has been rallying in recent weeks, partly driven by calming Fed fears, and partly by investors talking a wait and see approach on local government formation. 

The rally has been modest, with the TRY basket 1.8% stronger vs. month ago, but more than 4% weaker than a quarter ago. 

"USD-TRY is expected to trade in the 2.75 range by end-2015 after the Fed has hiked rates", says Commerzbank.