SMM: a month ago, the Turkish lira collapsed, its biggest one-day decline since the crisis last summer, while public attention was focused on the collapse in the country's foreign exchange reserves and the tightening of monetary policy by the Turkish central bank. JPMorgan's currency strategist released a report recommending shorting the Turkish lira as the Turkish lira tumbled, and the investment bank predicted that the dollar would fall to 5.9 against the Turkish lira.
(Anezka Christovova) and THAAD Sidiki (Saad Siddiqui), analysts at JPMorgan Chase, wrote at the time that the Turkish monetary authorities might pay less attention to the stability of the Turkish lira after the March 31st election. And reduce the country's foreign exchange reserves, which could lead to a further weakening of the lira, sending the dollar sharply higher against the Turkish lira.
JPMorgan's move was undoubtedly fuelled by the report, which angered Turkish President Recep Tayyip Erdogan, followed by a separate investigation by Turkey's central bank and capital market regulators into JPMorgan's proposal to short the lira.
In fact, Turkey is eager to find a scapegoat for the collapse of the lira. It turns out that the collapse was mainly caused by local banks, and Turkey's central bank has been pretending not to intervene, distorting the true state of its foreign exchange reserves. Turkey's central bank, of course, will not admit its mistakes, just as JPMorgan opened up another bearish report and rightly blamed the lira crash on the investment bank.
Turkish local media also specifically reported on the matter, and banking regulator BRSA said the JPMorgan analyst's report contained suspicion of "misleading and manipulating," causing market volatility and damaging the reputation of Turkish banks. The Capital Markets Committee has launched an investigation.
In retrospect, JPMorgan's advice did not flicker, and the Turkish lira has fallen to 5.95.
A month later, Mr Erdogan's anger at JPMorgan seemed soon to be forgotten. Now another Wall Street investment bank intends to rekindle his anger.
In a report released late Friday, Goldman Sachs mentioned that the Turkish lira could fall to an all-time low within 12 months. Zach Pandel (Zach Pandl), currency strategist at the bank, predicts that Turkey's central bank will no longer boost confidence in the lira, which is likely to cause the lira to fall to levels during the mid-2018 crisis, or worse.
Analysts at Goldman Sachs saw a sharp rise in interest rates last year as a necessary condition for stabilizing the lira, but last week the Turkish central bank unexpectedly cancelled its promise to "tighten monetary policy further if necessary." This will open the door to interest rate cuts and further depreciation of the Turkish lira. Goldman Sachs expects the Turkish lira to fall to 6.25 in three months, 6.5 in six months and an all-time low of 7 in 12 months, meaning the lira will fall 15 per cent over the next year.
A month ago, JPMorgan's forecast came true. is it possible that Goldman's forecast will come true again this time? We have to wait for time to test it, and traders should be more concerned about the reasons why JPMorgan and Goldman Sachs are bearish on lira. To be sure, however, Goldman will also face Mr Erdogan's "anger" if the lira collapses again in the near future.