Turkish lira seen weakening to 21 per dollar at HSBC

Turkey’s lira may fall to 21 per dollar by June next year, a deadline for the country to hold presidential and parliamentary elections, according to British bank HSBC.

HSBC revised its estimate for the end of June 2022 from 18.2 liras per dollar, BloombergHT reported on Wednesday citing a report by the bank.

The lira was trading down 0.4 percent at 17.96 per dollar on Wednesday, meaning HSBC expects it to weaken by almost 15 percent by June next year. The currency has lost more than a quarter of its value in 2022 after declining by 44 percent last year.

HSBC also revised its year-end lira forecast to 19.5 per dollar from 17.5 per dollar.  

The lira has depreciated after the current account deficit widened, a spike in inflation to 79.6 percent led to more negative real interest rates and initial enthusiasm abated for the government’s so-called “liraization strategy”, which included introducing lira bank deposit accounts linked to the dollar in December, said Murat Toprak, HSBC currency strategist for Central and Eastern Europe, the Middle East and Africa.

The main macro risk for the Turkish lira is related to the balance of payments dynamics, where the deterioration is more than expected, Toprak said, according to BloombergHT. The foreign trade deficit, which is close to record levels, is leading to a wider current account deficit even at a time when the tourism sector should be at its strongest, he said.

Toprak said the lira would depreciate more significantly in the autumn when seasonal tourism revenues would be less supportive and exports continued to weaken due to the recession pressure in Europe.

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