The Lira has been on a weakening trend since December 2021, slipping past 19.50/USD. Economists at Société Générale analyze where the USD/TRY could go depending on the results of the Turkish elections.

If Erdogan is defeated by Kilicdaroglu, Lira assets should rally

“Intervention by the authorities has depleted FX reserves to record lows, exposing the currency to potentially more turmoil in the event of a status quo scenario and no major changes to the political landscape.”

“Any selling is likely to be countered by the authorities and means a controlled rather than abrupt depreciation is more likely.”

“Unconventional monetary policy tactics of liraization may then endure and result in additional Lira selling. In this scenario, we pencil in 20.00/USD by the end of this quarter and 24.50/USD by 1Q24. If on the other hand Erdogan is defeated by Kilicdaroglu, and the opposition block Nation Alliance can form a majority in the Grand Assembly, Lira assets should rally on the basis that policy orthodoxy will be restored.”