HSBC Changes Its Dollar / TL Expectations

HSBC Changes Its Dollar / TL Expectations HSBC changes its Dollar / TL expectations. The bank reduced its 2021 dollar / TL forecast from 7.70 to 7.10. The report shared by the bank stated that "The change in economic management and the transition to a more traditional policy approach supported the outlook of the Turkish lira." HSBC has positively assessed Central Bank of Turkey’s (CBRT) orientation to a more conventional monetary policy. However, the bank revised its dollar / TL expectation for the end of 2021 from 7.70 to 7.10. “The change in the management of the economy and the transition to a more traditional policy approach supported the outlook for the Turkish lira,” said the report dated November 24, signed by Murat Toprak, the Bank's Foreign Exchange Strategist for Central and Eastern Europe, Middle East and Africa (CEEMEA) and Dominic Bunning, Director of European Foreign Exchange Studies. “We believe that pursuing a policy in this direction will bring the currency to stronger levels by the end of 2021, given the serious cheapness of the Turkish lira and the low foreign positions.” HSBC also said, “We think that a traditional policy framework in which funding is only provided at the 1-week repo rate increases transparency and supports the upward potential of the Turkish lira”. In the report of the bank, it was noted that the Turkish lira will continue to face high inflation in 2021, while the CBRT seems ready to offer sustainable positive real interest rates that will buffer the currency. “We expect the Turkish lira's extremely cheap position to recover at least partially, as after the remarkable rate hike and more orthodox steps in 2018. With a more predictable monetary policy and an attractive carry yield, some of the large portfolio outflows in 2020 could be reversed. In our opinion, foreigners' bond positions are particularly low and there is room to recover. Our main scenario does not assume a full normalization of the value of the Turkish lira in the medium term.”