In the first weeks of November, the Turkish lira lost almost 25% of its value, while since the start of the year the currency has weakened by more than 40% against the US dollar. Wells Fargo economists expect local action to be taken in an attempt to stabilize the TRY, although further depreciation of the pound and new highs against the dollar are very likely.
Turkish authorities to take action in response to mass sale
“We expect interest rates to be cut again at the next monetary policy meeting on December 16, and the lira to continue to hit new lows against the dollar by the end of this. year and throughout 2022 and 2023. “
“Our most recent forecast for the USD / TRY exchange rate drops the lira to 13.00 in the second quarter of 2022 and finally to 14.50 at the start of the first quarter of 2023. Our forecast implies a further depreciation of approximately 15% of the pound by the start of 2023; However, the risks around this forecast are undoubtedly tilted towards more weakness in the pound than we currently expect. “
“In the very near future, we expect the Turkish authorities to ask local banks to resume selling US dollars and buying Turkish lira; however, Turkish banks probably do not have enough US dollars to disrupt the downward pressure on the lira. “
“We expect the Turkish authorities to contact allies such as Qatar, China, Azerbaijan and other Asian countries as well as Russia with the aim of improving, expanding or even initiating currency swap lines in US dollars. However, the broader market forces are currently too strong, and we doubt that these currency swap lines, if secured, will do much to alter the upcoming depreciation path to read it. “