JP Morgan predicts 30% depreciation of Turkish Lira against US dollar

The Turkish lira could depreciate by 30% against the dollar even assuming a normalization of the country's policies after the upcoming elections in May, JPMorgan analysts expect.

“In a scenario of a strong commitment to orthodox macroeconomic policies, we expect USD/TRY to peak at 24-25, amid elevated volatility, and bond yields to rise to 25%,” analysts, including Anezka Christovova and Michael Harrison wrote in a report.

“At such levels, we would consider it reasonable to turn bullish on Turkey’s local assets, expecting positive total returns thereafter,” they added.

Analysts also see a macro adjustment in the second half of the year, regardless of the outcome of the elections.

Turkish Lira was trading at 19.36 per dollar on Saturday, heading to a sixth weekly decline, the longest losing stretch since October.

“In a scenario of a committed return to orthodox inflation-targeting policies, we anticipate the central bank to hike the policy rate to 30% in the third quarter, from the current level of 8.5%,” analysts said.