Foreign Banks Issue Striking Exchange Rate Forecast: What Will the Dollar/TL Be at Year-End?

International financial institutions are closely watching the Turkish Lira's trajectory, with several foreign banks forecasting a continued upward pressure against the US dollar. Projections suggest the USD/TRY exchange rate could reach the 48 lira mark by the end of the year, driven by a combination of domestic and international economic factors.

The Turkish Central Bank's (TCMB) monetary policy, which has maintained a stable policy rate at 37% for the past four meetings, plays a crucial role. The bank's stance against lowering interest rates until a sustainable decline in inflation is achieved contributes to market uncertainty. This persistent high inflation continues to exert pressure on the Turkish Lira, making it vulnerable to depreciation.

Geopolitical tensions, particularly in the Middle East, are exacerbating the situation by driving up global oil prices. This increase in energy costs further fuels inflation in Turkey, complicating efforts to strengthen the lira against the dollar. Analysts believe that for the upward trend in the USD/TRY to slow or reverse, a decrease in oil prices, a significant drop in inflation, and a reduction in geopolitical risks are necessary.

Specifically, a de-escalation of tensions between the US and Iran could lead to lower oil prices, potentially improving Turkey's inflation outlook and supporting the lira. In the current environment, the consensus among market participants is that the upward trend in the dollar/lira exchange rate will likely persist in the short term. Banks like Commerzbank have previously warned about increased volatility and the risk of sharp depreciation, while Societe Generale offers a slightly more optimistic view, expecting the lira to stabilize around 48 TL, supported by tourism revenues and potential interest rate cuts starting in the autumn. Barclays also anticipates around 300 basis points of rate cuts by year-end, but still expects high interest rates to support the lira.