Commerzbank predicts continued Turkish Lira depreciation

Commerzbank strategist Tatha Ghose predicts that the Turkish Lira will continue to lose value through the end of the year. Ghose noted that net foreign exchange reserves, excluding swaps, remain at limited levels, placing a heavy burden on the Central Bank and public banks to intervene in the market to slow the currency's depreciation.

According to the analysis, the USD/TRY exchange rate follows a pattern of horizontal movement followed by jumps to new levels, a trend described as the “breaking of successive defense lines.” While policymakers may be able to slow the pace of the Lira's decline, Ghose suggests they will struggle to change the fundamental downward trend.

The report also highlights challenges facing the disinflation process, including persistent inflation and risks from external price shocks. Additionally, Ghose commented on Central Bank Governor Fatih Karahan’s indication regarding the potential resumption of one-week repo auctions, noting that such a move could lower effective funding costs and be perceived by the market as a loosening similar to a rate cut.