Timothy Ash, senior strategist for emerging markets at London-based Bluebay Asset Management, said yesterday he expects the Turkish lira to remain stable and strong for the rest of the year.
Speaking to Anadolu Agency (AA), Ash stated that there are global developments which might support the lira in the future, adding that there is also a very supportive environment in terms of risks. He also noted that the global economy is improving, and growth in the EU, the U.S., Japan and the emerging markets seems good. Ash also said global liquidity continues to flow because tightening in emerging markets has slowed in an environment of low inflation.
Stressing that the current global environment encourages investors to turn toward the lira, Ash said: "This might increase investors' demand for fixed-income assets in countries with high interest rates. Turkey is currently offering around an 11 percent to 12 percent return in lira - which is attractive for foreign investors."
Ash further stated that Turkey continues to benefit from portfolio investments, adding that the net portfolio flow to Turkey in the first half of the year reached $17.8 billion from the $8.9 billion in the first half of last year.
"Lira is in good condition
at current levels"
Ash remarked that, while there is a sales trend in lira at home, foreign investors' interest in the currency keeps the dollar-lira exchange rate at 3.50.
Ash explained, "I have the impression that the Central Bank of the Republic of Turkey [CRBT] is pleased to keep interest rates at the current level to support the lira."
Underlining that a stable currency supports domestic confidence and economic recovery, Ash noted that the central bank's habit of cutting interest rates too quickly might create problems. He added: "And in this case, the lira might go on sale both at home and abroad, and a weaker exchange rate might be seen. This might undermine confidence and lead to an increase in inflation. I do not think we will see the central bank cut interest rates without seeing that the decline in inflation continues."
With regard to the general outlook of the lira's performance, Ash said: "I think the current level of the lira is in good condition. Assuming that the central bank keeps interest rates at the current level and that there is no increase in local political risks, I think the transition to lira at home might support the currency. This might create an area for the central bank to reduce interest rates late this year or early next year. I expect the lira to remain stable and strong for the rest of the year."
Factors that might
positively affect the lira
İpek Özkardeşkaya, senior market strategist at the London-based London Capital Group, expressed that the clear decline in the expectations for the U.S. Federal Reserve's (Fed) interest rate hike, the slowdown in annual inflation trend, the curbed current account deficit and budget deficit might positively affect the course of the lira.