JPMorgan announces short position on six-month USD/TRY forwards in outright trades
JPMorgan strategists stated that the Turkish lira is significantly undervalued, noting that this situation creates a potential for a 20 percent annual carry return.
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Strategists at the bank, including Anezka Christovova, stated in a note they published, "Our model shows that the lira is significantly undervalued (approximately 30 percent to 35 percent below fair value). This allows for a significant real appreciation."
The analysts emphasized that inflation is expected to lead to a real appreciation of approximately 40 percent in the lira, stating that this would be consistent with a 20 percent annual spot depreciation of the lira, which implies a 20 percent carry return. The strategists also pointed out that lira-denominated government bonds are approaching fair value, noting that they may soon see opportunities in bonds as well.
JPMorgan also announced that it has taken a short position on six-month USD/TRY forwards in outright trades. The lira has shown the worst performance among emerging market currencies this year after the Argentine peso, with a 35 percent loss in value against the dollar.
President Recep Tayyip Erdoğan also stated that the disinflation program they are implementing will very likely lead to a real appreciation in the lira, saying, "The process in which the Turkish Lira loses value in real terms has come to an end."