The Turkish lira can’t defy gravity forever

Although the Turkish lira is at its weakest ever level against the US dollar, it would have fallen far further by now were it not for intervention by policymakers. We anticipate that the currency will depreciate sharply before long against a backdrop of elections, souring global risk appetite and unfavourable inflation differentials. We forecast the lira to weaken by ~25% over the remainder of 2023, from ~19.3/$ to 26/$.

In view of the wider interest we are also sending this FX Markets Update to clients of our Emerging Europe Economics Service.