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Foreign U.S. Treasury Holdings Fall as Japan, UK and China Cut Positions 
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USD/TRY is expected to witness further upside this year if the Central Bank of Turkey (CBT) does not simplify its policy and tighten its main policy rate and only tries to muddle through using daily liquidity management operations.
CBT's March expectations survey highlighted an optimistic growth outlook held by market forecasters, but a deteriorating inflation outlook. GDP growth expectations are hovering around 2.9 percent for this year, which seems quite unrealistic and difficult to explain given the performance of recent quarters and the upcoming political uncertainty.
Inflation forecasts have, however, risen to 9.1 percent for this year-end, which constitutes a marked deterioration. Forecasters expect the lira, too, to weaken from here by year-end, with USD-TRY reaching 3.85, which is not dramatically different from our own 3.90 forecast. The survey shows that analysts do not expect CBT to tighten its benchmark rate this week, which matches expectations, Commerzbank reported.
"We expect CBT to only raise its marginal funding rates, such as the late liquidity rate," the report said.
