Dollar/TL forecasts from major banks: How much will it be at the end of the year?

The horizontal trend seen in the dollar/TL exchange rate due to the Central Bank of the Republic of Turkey's (TCMB) net foreign currency purchases, combined with the relatively high return on the Turkish Lira (TL), keeps the appeal of the TL high for both foreign and domestic investors. 

The TL, which had been losing value on a monthly basis without interruption since September of last year, closed March with a 3.5 percent loss against the dollar—its most significant depreciation since July—before finishing April with a limited gain of 0.04 percent.

In May, the TL gained value against the dollar at roughly the same levels. In the TCMB's market participants survey for May, the 12-month exchange rate expectation was recorded at 41.80 TL. Statements regarding year-end dollar forecasts continue to arrive one after another from global banks.

YEAR-END DOLLAR/TL FORECAST FROM JP MORGAN

Highlighting growing confidence that Turkey's policy rate and inflation rate are nearing their peak, JP Morgan has revised its year-end expectation for the dollar/TL parity from 36 to 35.5.

The bank stated that it is confident that inflation will fall to 25 percent by the end of 2025.

The bank also upgraded its investment recommendation for Turkish government domestic debt instruments (DİBS)/government bonds to "overweight."

BANK OF AMERICA: WE PROJECT THE DOLLAR/TL RATE TO BE 38 BY THE END OF 2024

In a report on Turkey's economic outlook published last week, Bank of America included its dollar/TL and inflation forecasts. 

BofA stated that positioning in the Turkish Lira and TL-denominated bonds is widespread, and that crowded positioning in the TL and inertia in inflation are seen as the most significant sources of concern. The report noted, "Since the local elections, domestic demand for foreign currency has reversed, and in our meetings with banks, they said they have seen both individual investors and corporate companies on the selling side," adding, "If the TL stabilizes, the trend of de-dollarization may continue through the summer months. Given the high level of inflation, we expect some nominal depreciation in the TL when capital inflows slow down."

BofA expects the dollar/TL to be at the 38 level by the end of the year.

HSBC SHARES DOLLAR/TL EXPECTATION

HSBC strategists announced their year-end dollar/TL forecasts in a note dated May 13. Stating that they updated their dollar/TL forecasts based on the TCMB's inflation forecast and the latest inflation expectations survey, HSBC officials noted that their macro and fiscal assessments have remained "largely" unchanged. 

In the note, it was recorded that HSBC maintains its view that the dollar/TL will move slowly and limitedly in an upward direction and that they have not changed their year-end forecast of 36.0.

On the other hand, it was stated that if the TL remains stable in real terms, the dollar/TL could finish the year in the 37-40 range.

News Source: 12punto