UBS Revised Its USD/TL Forecast

UBS revised its USD/TL forecast. UBS changed its US dollar forecast upwards.

In a research report published by UBS, it increased its USD/TL forecast for the fourth quarter of 2021 from 8.60 to 9.00, and pointed out that the current account deficit, worsening pandemic conditions and the increase in the number of global cases also increased the risks. Noting that they anticipate a stronger growth of the Turkish economy than last year, according to the latest manufacturing purchasing managers index (PMI), the bank also pointed out that the difficulties in financing the current account deficit may limit growth. Estimating that the pandemic will gradually decrease towards the end of 2021, UBS said that the expansionary monetary policy will continue in this process and these conditions will relieve the TL a little, but a rapid increase in US interest rates may put pressure on the TL once again. Describing the removal of the statement “additional tightening will be made when necessary” from the decision text of the Monetary Policy Committee as a dovish stance, the bank expressed that this raised concerns about persistent high inflation. Stating that the uncertainty regarding whether the monetary policy will be tight enough to anchor inflation expectations in the upcoming period continues, UBS explained that the low foreign exchange reserves are another negative point for the TL. Stating that significant interest increases can be made if the TL depreciates rapidly, the bank updated its USD/TL forecast for the second quarter of 2021 from 8.00 to 8.30, while its forecast for the third quarter was changed from 8.30 to 8.80. UBS, which predicts the USD/TL exchange rate to reach 9.00 in the fourth quarter of 2021, increased its exchange rate forecast from 8.90 to 9.00 for the first quarter of 2022.