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Goldman Says Turkey Is ‘Back in the Game’ With Lira Trade

Strategists see real interest rates turning positive soon

The central bank has more than tripled the key rate since June

Tweet on Turkish Lira

Bloomberg Chart

The lira has weakened 32% this year to trade at 27.4 per dollar on Thursday.

The lira carry trade is back as Turkey ramps up its campaign to bring inflation to heel, according to Goldman Sachs Group Inc.

Strategists at the Wall Street bank expect interest rates, when adjusted for the future inflationary outlook, to turn positive in coming months as policymakers pull harder on the monetary levers to tamp down on price pressures. Real rates currently stand at minus 29%, one of the lowest levels anywhere in the world.

If the central bank hikes its benchmark rate to 40% or higher by year-end, that would surpass Goldman’s inflation forecast for the next 12 months.

Such a trend would help to put the lira carry trade — in which investors borrow money in countries with low-interest rates to earn higher returns by parking it in Turkey “back in the fray’


Image: Turkish Lira