Societe Generale expects that the Central Bank of the Republic of Turkey (TCMB) will implement a 650 basis points interest rate hike at the Monetary Policy Committee meeting scheduled for June 22nd.
Societe Generale has recommended opening short positions on the USD/TRY with a target of 10% profit in carry positions over a three-month period. The institution expects the policy interest rate to be raised by 650 basis points to 15% at the June 22nd meeting, with further interest rate increases anticipated in July and August.
In a report dated June 2nd, signed by Marek Drimal, the Head of CEEMEA Strategy, it is predicted that the increased tourist revenues during the summer season will improve the external balance. Additionally, the possibility of the Central Bank of the Republic of Turkey (TCMB) raising interest rates and implementing certain orthodox policies is expected to enhance the attractiveness of carry positions for the Turkish lira.
Drimal anticipates that the lira will perform well in the near term in forward contracts. Specifically, he advises opening short positions on USD/TRY at 20.88 and setting a stop-loss level at 23.
According to the institution, the USD/TRY is expected to gradually decline in the coming months and reach around 21.50 by the end of the third quarter.
The note highlights the main risks as the disappointment in returning to policy orthodoxy and the possibility of the new economic management weakening the currency to support exports.
Societe Generale expects the policy interest rate to be raised by 650 basis points to 15% on June 22nd, followed by additional 500 basis point increases in July and August.