Turkey’s widening current-account deficit and record low yields will weaken the lira over the next three months, slamming the brakes on this year’s bond rally, according to Barclays Plc, the top forecaster for the currency.
The top forecaster for the Turkish lira says his prediction for the currency to strengthen by year- end risks being undermined by the country’s external funding needs even as the central bank provides support.
Emerging-market equity funds took in $1.93 billion in the week to Jan. 18, while those dedicated to bonds attracted $172 million, Barclays Capital said, citing data from U.S.-based researcher EPFR Global.
Emerging-market stocks fell the most in a week, led by Chinese equities, on concern regulators may depress valuations by resuming initial share sales. South Africa’s rand slid to an almost four-year low versus the dollar.
The third-highest local-currency yields aren’t enough to lure Turks, who are putting record amounts of cash into dollar deposits on concern the lira is vulnerable in the run-up to presidential elections.
Barclays Plc said that Moody’s Investors Service may follow Fitch Ratings in upgrading Turkey’s credit to investment grade later this month, triggering as much as $2.5 billion in extra demand for Turkish Eurobonds.