FxWirePro: Turkish Lira to depreciate another 10 percent against USD

After bottoming around 4.07 area against the USD in December 2016, Turkish Lira continued to strengthen on the back of a weaker dollar and in July last year it reached as high as 3.88 per USD. However, as the domestic inflation rate adds pressure on the central bank to raise rates further, which has already been pushed to 8 percent and as Turkey’s relations with the other NATO members, as well as the European Union worsens Lira has steadily been weakening and earlier this month reached as low as 4.19 per USD.

Our calculations suggest, as the country faces a decisive election in June amid domestic economic and political woes, its currency is set to depreciate further. We are expecting another 10 percent decline in Turkish Lira against the USD from the current rate of 4.07 per USD. However, an interim correction looks likely; so we would recommend readers to enter short positions on Lira at correction.