May 27 2019

Turkish lira to weaken to at least 10 per dollar, investor says

Turkey’s embattled lira will fall to at least 10 per dollar within the next three years, said Matein Khalid, Chief Investment Officer and Partner at Asas Capital.

The lira is vulnerable to speculative attacks by offshore investors despite undergoing a currency crisis last year, Khalid said in an analysis published by AME Info on Monday. He said he based his prediction on “current relative inflation differentials” and the forecast was an optimistic one.   

The lira is fragile partly because the central bank lacks the firepower to support it, Khalid said. The country also faces a systemic banking crisis and President Recep Tayyip Erdoğan has mismanaged relations with the United States, Germany, Egypt, Saudi Arabia and the United Arab Emirates, he said.

The lira rose 0.4 percent to 6.05 per dollar at 11:03 a.m. in Istanbul on Monday.

Erdoğan is also poised to escalate a crisis with neighbours Cyprus and Greece over natural gas drilling rights in order to boost his power base both among ordinary Turks and his governing Justice and Development Party, Khalid said. This would be “naturally catastrophic” for the economy and the lira, he said.