HSBC, in its report titled “Developing Market FX Roadmap,” has highlighted that the Turkish Lira (TL) is being supported by the dynamics of carry trade, attributing this support to the significant shift in the traditional approach of monetary policy. The report suggests that the depreciation of TL is expected to remain limited in both speed and scale.
According to the report, the traditional leaning of monetary policy towards the conventional side has made carry trade dynamics supportive for the Turkish Lira. It further conveys signals indicating that the Central Bank of the Republic of Turkiye (TCMB) is inclined towards the appreciation of TL’s real value.
Emphasizing that tight monetary policy conditions support the Turkish Lira, the report states, “Strict monetary policy conditions support the Lira by limiting dollarization risk. TL deposit interest rates have become more attractive both nominally and in real terms.”
The report discloses that HSBC’s forecast for the end of 2024 and the first half of 2025 for the USD/TL exchange rate stands at 33. It anticipates a supportive macro outlook for the Turkish Lira, particularly in the form of a contraction in the current account deficit.
The report defines carry trade as “borrowing from a country with low-interest rates in its currency to obtain interest returns from another country with higher interest rates.”
As HSBC underscores the supportive dynamics for the Turkish Lira, the financial community will be closely monitoring the evolving market conditions and the implications for investors engaged in currency markets.
source: aa.com.tr/ prepared by Melisa Beğiç