The Turkish lira will remain weak, trading at more than 2 per dollar for the next year despite central bank efforts to curb losses, a Reuters poll showed on Thursday. A survey of 36 analysts and foreign exchange strategists suggested the lira would trade at 2.01 to the dollar in three months and at 2.02 by this time next year. The currency touched an all-time low of 2.0840 on September 5, losing as much as 15 percent against the dollar this year. It was trading at 1.9962 on Thursday.
Consensus forecasts in the latest survey for where the lira will trade in three, six and 12 months from now were slightly weaker than in a poll taken in July. Relatively low reserves of foreign currency compared with emerging market peers also makes Turkey vulnerable to capital outflows and speculation about them once the US Federal Reserve begins to taper its extraordinary stimulus programme. "In the next 12 months I do not see Turkish lira in an appreciating trend," said Mehmet Besimoglu, a senior economist at Oyak Securities, noting that the Fed's first step toward ending its bond purchase programme is just around the corner.
"Turkey has a high current account deficit and high short-term debt, which needs to be financed. On top there is a central bank saying it will not use interest rate hikes to defend the currency," he added. The central bank has sold $9.8 billion of Turkey's foreign currency reserves in the past three months to defend the lira. Fears about the impact on Turkey of the deepening conflict in Syria have also forced the central bank to take steps to shore up the currency, while trying to keep interest rates low.
Central Bank Governor Erdem Basci said last month that he would not defend the lira with rate hikes, triggering more currency losses. The central bank kept its main one-week repo rate at 4.50 percent, its borrowing rate at 3.50 percent and its overnight lending rate at 7.75 percent at its September policy meeting. Governor Basci said last week that the lira's fall had worsened the outlook for inflation and that the currency was unjustifiably weak.