Morgan Stanley: Turkish Lira Carry Trade Retains Its Appeal.
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Morgan Stanley economists expect carry trades in the Turkish lira to remain attractive. The bank stated that it continues to prefer short 3-month dollar/TL positions, anticipating that nominal returns will remain “comfortably above” the rate of currency depreciation.
Morgan Stanley maintained its carry trade recommendation for the Turkish lira, while predicting a 250 basis point interest rate cut by the end of the year.
Economy - Morgan Stanley maintained its positive recommendation for carry trades in the Turkish lira, while noting that the CBRT has room for a 250 basis point interest rate cut by the end of the year.
Morgan Stanley stated that Turkish lira carry trades remain attractive, predicting that nominal yields on the lira will continue to significantly outpace the currency depreciation. The bank maintained its recommendation for a 3-month short position on the dollar/TL exchange rate, while assessing that the Central Bank of Turkey (TCMB) has room for a 250 basis point interest rate cut by the end of the year.
The Central Bank's decision was in line with expectations, keeping interest rates stable at 37%. This decision, coming at a time when oil prices are rising again, has made the path of future interest rate cuts uncertain. While investors are focusing on yields following the TCMB's decision, an analysis by İş Yatırım indicated that the net real monthly return on Turkish Lira is 0.62%, suggesting a reasonable return.
Morgan Stanley maintained its current recommendation, stating that carry trades in the Turkish lira remain attractive. The bank expects nominal yields to outpace the currency depreciation, while emphasizing that the CBRT has room for interest rate cuts by the end of the year.
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