Top Currency Forecaster Sees No Letup in Rout of Turkish Lira and Romanian Leu

(Bloomberg) -- The currencies of Turkey and Romania start the second quarter at the bottom of the emerging-market pack outside Latin America. The most-accurate forecaster for their region says they’ll end the year even weaker.

Turkey rattled investors by limiting their ability to exit lira trades in the run up to elections last month, while Romania is wrestling with plateauing growth and the fallout from a policy U-turn. Their troubled markets can expect little support from a fragile global economy, according to Marcin Lipka, a senior analyst at Polish brokerage, which topped Bloomberg’s forecaster rankings in the first quarter of the year for eastern Europe, the Middle East and Africa.

Top Currency Forecaster Sees No Letup in Rout of Turkish Lira and Romanian Leu

Based on Lipka’s forecasts the lira will drop more than 8 percent against the dollar and the leu will fall a further five percent against the euro by the end of the first quarter next year.

"Political uncertainty after local elections plus recession and 20 percent inflation is not a favorable mix" for the Turkish currency, Lipka said. “The main problem in Romania is the fiscal side of things in view of the looming economic risks. With growth slowing it will be hard to consider rate hikes or keep the budget in check.”

  • Lipka sees the lira at 6.10 per dollar by the end of the year and 6.20 at the end of 1Q 2020. The currency was 0.9 percent weaker at 5.6755 on Monday
    • READ: Turkish Markets Drop Across the Board as Erdogan Disputes Vote
  • The leu will drop to 4.9 per euro by year-end before hitting 5 toward the end of the first quarter 2020, Lipka predicts. The Romanian currency was little changed Monday at 4.7507
    • READ: Romania’s Retail Surge Spells Bad News for Its Currency: Chart

Lipka’s third prediction was for Iceland’s krona, which he said could fall almost 5 percent to 140 per euro by the end of the year following the bankruptcy of WOW Air Hf. The company handled 35 percent to 40 percent of tourist traffic to the country, he said.

“Maybe half of this will be managed by other carriers, while the flow from the east coast of the United States is unlikely to be filled, and Brexit will additionally limit tourism from the isles,” Lipka said. “This may only exacerbate the downturn in growth and damage the krona.”

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