USD/TRY likely to continue rising, says Commerzbank

The USD/TRY currency pair is expected to continue rising following a brief pause, noted Commerzbank in a research report. The Central Bank of Turkey is ready to bear a fairly rapid rate of depreciation of the Turkish lira every year. In 2017 too, the Turkish central bank is likely to stand higher inflation while it attempts to find a path to underpin the real economy, according to Commerzbank.

Therefore, there are possibilities that following a short period of stability of the Turkish lira, the Central Bank of Turkey would cut rates again. However, it might probably not be able to cut rates all the way down to current levels as the market would not allow this during a Fed hiking cycle.

“We will probably end up with a combination of still high interest rates, and also higher USD/TRY over the coming year”, added Commerzbank.