Dollar/TL year-end expectations: What do foreign banks say?

Recently, the Dollar/TL exchange rate has continued its upward trend, influenced by factors closely affecting the Turkish economy. The Central Bank's decision to keep the policy rate steady at 37 percent for a long time, and the fact that no interest rate cuts are being considered without seeing a permanent decline in inflation as expected, has reduced the perception of instability in the market. However, persistently high inflation continues to exert downward pressure on the Turkish Lira.

OIL PRICES AND GEOPOLITICAL TENSION DRIVE THE EXCHANGE RATE UP

Rising oil prices due to tensions in the Middle East are fueling inflation in Turkey while also creating additional pressure on the exchange rate. Experts point out that the upward trend in the Dollar/TL rate may continue in the short term, emphasizing that for downward movements to occur, there must first be a decline in oil prices, a clear retreat in inflation figures, and a reduction in regional tensions.

It is noted that a possible thaw in relations between the US and Iran could lead to cheaper oil in international markets, which in turn could provide relief for the exchange rate and inflation in Turkey.

CONSENSUS ON THE 48 TL LEVEL BY YEAR-END

The general expectation in financial circles is that the Dollar/TL will continue its upward trend under current conditions. While the 48 TL level is being mentioned more frequently for the end of the year, it is stated that the main determining factor in short-term fluctuations will be the decisions of the Central Bank.

The latest forecasts from international banks are also noteworthy. In its assessment in June, Commerzbank predicted that monetary policy steps could create volatility for the Turkish Lira and that inflation would remain above 30 percent. Following the July figures, the bank's analysts reported that the new rules introduced by the Central Bank regarding foreign currency did not provide strong support for the TL.

Societe Generale, which holds a more optimistic perspective, states that it expects a Dollar/TL level of approximately 48 TL, which is below what is priced in the futures markets. The bank stated that tourism revenues during the summer months could support the TL and that possible interest rate cuts could begin in the autumn.

Barclays, on the other hand, pointed out that a total of 300 basis points in policy rate cuts could be possible by the end of the year, but stated that despite this, high interest rates could be effective in protecting the TL, and that a limited and controlled depreciation is expected on the exchange rate side.

Citi, which maintains a positive outlook, expects tourism revenues to continue supporting the Turkish Lira, although not as much as last year, and reports that the general outlook remains supportive.

ALL EYES ON THE SEPTEMBER CENTRAL BANK DECISION

Actors in the financial and foreign exchange markets have now turned all their attention to the Central Bank Monetary Policy Committee meeting to be held on September 10. In addition to the interest rate decision to be taken, the statements to be made after the meeting are expected to shape the short-term course of the Dollar/TL.

High inflation, regional geopolitical risks, and the increase in energy prices stand out as the main reasons for the upward pressure on the dollar against the Turkish Lira. The forecasts of international banks reveal that a significant increase in the exchange rate as the year-end approaches is a very strong possibility.

News Source: 12punto