Soc-Gen Revises Lira Forecast Lower, Keeps as Top Emerging Pick

Societe Generale SA revised its year-end forecast for the lira downward, while maintaining the Turkish currency as its top pick among emerging-market countries.

The French investment bank now sees the exchange rate at 1.65 per dollar, which is weaker than its earlier expectation of 1.60 per dollar. The revision reflects recent softness in the currency, according to an e-mailed report from Benoit Anne, a London-based strategist. The lira has depreciated 1.9 percent this quarter, trading at 1.8159 per dollar by 9:45 a.m. in Istanbul.

Societe Generale has the most bullish of 22 forecasts for the lira by the end of this year, according to data compiled by Bloomberg. Lloyds Banking Group has the most bearish forecast, seeing the currency at 2.02 per dollar.

“The lira remains our top emerging-market currency pick by year-end,” Anne said. “A move of well over 10 percent by December is quite likely in our view.”

The central bank may cut its inflation forecast for 2012, Governor Erdem Basci said yesterday, reinvigorating speculation about a rate cut. He may lower forecast of a 6.5 percent rate by year-end to the bank’s 5 percent official target if the downward trend in commodity and oil prices continues.

Crude oil prices have plunged 23 percent this quarter, heading for the biggest drop since the final three months of 2008. Turkey imports almost all of the oil it consumes. The Standard & Poor’s GSCI Spot Index of 24 raw materials has dropped 16 percent from this year’s highest close of 715.52 on Feb. 24.

Inflation slowed to 8.3 percent last month from a three-year high of 11.1 percent as the average cost of daily funding rose to 9.8 percent in May from 8.3 percent in April. June’s figure on price increases will be released July 3.

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