HSBC's Analysis of Turkey: Expectation of Rise in Turkish Lira

HSBC's Constructive Turkey Analysis

HSBC announced in its latest strategy report that it maintains a "constructive" outlook for the Turkish lira (TRY). Bank analysts emphasized that the return potential of the Turkish lira among emerging markets is more pronounced than that of regional competitors.

Currency Forecast and Real Value Gains

The HSBC FX strategy team has set a USD/TRY forecast of 48 for the end of 2026. This forecast indicates that there will be limited real value gains in the Turkish lira. The report states that this value would be welcomed in the current inflation environment, which is above 30% according to the Central Bank of the Republic of Turkey (TCMB).

Carry Trade Opportunities in the CEEMEA Region

Another noteworthy point in the report is the position of the Turkish lira in the CEEMEA (Central and Eastern Europe, the Middle East, and Africa) region. HSBC believes that in an environment where the appeal of the South African Rand (ZAR) and Central European currencies has diminished, the Turkish lira presents the most attractive "carry trade" opportunity in the region. Although the TCMB is expected to begin lowering interest rates, the bank forecasts that a strong positive real interest rate cushion of approximately 800 basis points will be maintained throughout 2026.

Economic Resilience and Reserves

HSBC analysts indicated that the Turkish economy demonstrated resilience against internal and external shocks last year, and this resilience is expected to continue into 2026. The report draws attention to the most concrete improvement in financial stability occurring in the reserves of the TCMB. The bank’s net foreign asset position has significantly improved, rising above $80 billion from negative territory, providing important protection.

Inflation and Interest Rate Expectations

HSBC expects inflation to decline from 31% at the end of 2025 to 20% by the end of 2026. The Turkish economy is anticipated to grow by 3.5% in 2026, while the current policy interest rate, which stands at 37%, is expected to be gradually reduced to 25.5%.

The bank acknowledges that uncertainties such as the possibility of early elections and geopolitical developments pose risks, but states that the current stance of monetary policy and foreign exchange reserves are sufficient to support a controlled trajectory for the exchange rate.