TRY’s rally would not be sustainable – Danske Bank

In opinion of Allan von Mehren, Chief Analyst at Danske Bank, the recent strong rebound of the Turkish currency should lack sustainability.

Key Quotes

“Yesterday, the Turkish lira opened with a significant rally, reacting positively with other Turkish assets to President Erdoğan’s referendum victory on Sunday, with investors seeing an end to internal political uncertainty, which has been keeping markets very cautious and been lira bearish over the past six months”.

“Yet, in our view, the TRY rally does not look sustainable over the medium and long term as Turkey’s external woes (military operations in Syria, shaky relationship with the EU, Russia and the US) remain”.

“We expect that TRY buyers will become more sceptical longer term as, for example, Turkey’s widening current account deficit will keep the currency under pressure”.