Bank of America (BofA) strategists recommended buying the Turkish lira against a basket of euro and dollar with 3-month futures, as they believe that ‘the door is open for carry trades in high quality emerging markets’ despite strong US data.
‘We expect the USD/TL to remain below futures contracts as we expect real interest rates to remain positive based on both expected and actual inflation, potentially leading savers to favor the Turkish lira over foreign exchange,’ the strategists, including Mikhail Liluashvili, said in a note.
‘Our position structure helps mitigate the negative impact of a stronger dollar. It also means that the upside in a weaker dollar environment is lower,’ the report said.
BofA economists predict that the policy rate in Turkey will be 30 percent at the end of the year, and inflation will be 25 percent at the end of 2025 before falling to 16 percent in 2026.
Source: bloomberght.com
Translation: Cem Cetinguc