Yes vote would boost Turkish lira: Experts

By Gokhan Kurtaran and Burhan Sansarlioglu

ANKARA (AA) - A "Yes victory" in Sunday’s referendum would have a positive effect on Turkey’s economy, dispelling uncertainty and pushing the Turkish lira up against the dollar, experts told Anadolu Agency Friday.

"Turkish assets offer a high yield, high interest rate, making them attractive for people looking for yields, when you have low interest rates in the developed world. If yes votes win, risks would be lower and the market more attractive," said Nafez Zouk, a senior economist at London-based think tank Oxford Economics.

Zouk said that with political stability restored and good signals sent to markets, the local lira currency might rally to 3.5 against the dollar.

Commenting on a No victory scenario, he explained, "If there were early elections in the case of a No win, that would spur uncertainty and market selloffs.”

He added that a No victory would be a surprise for markets, which would lead to a selloff as the situation would sow uncertainty.

"My baseline view of the Turkish lira is that what happened between November and January was a bit of an oversell. We look at fundamental values, and in my calculation the lira is undervalued. People have sold too much of it," Zouk said.

-Stagflation

Piotr Matys, emerging-market strategist at Rabobank, told Anadolu Agency that if the referendum results in Yes, the lira will gain value against the dollar to stand around 3.5561.

"The governing AK [Justice and Development] Party intends to focus on economic reforms after the referendum, which would be an encouraging signal for investors," Matys said.

Matys said a No vote would have a negative effect on the lira as it would cause political uncertainty. "Under such a scenario the lira could weaken to 3.9415 against the dollar," he added.

He also warned that a No victory could cause a prolonged stagflation in Turkey’s economy.

"The Turkish economy would lose considerable momentum in the second half of the year. The Central Bank would have to respond to by tightening liquidity further," he added.

Tatha Ghose, a senior emerging-markets economist at Commerzbank, echoed Matys’ views, saying that lira could breathe a sigh of relief when the Yes vote leads the referendum.

"In the case of a No win, however, political stability will be immediately called into question and early elections could come because this will be negative for the currency. The lira might benefit from Yes and might reach around 3.6 against the dollar," he said.

Last year Turkey's economy grew around 3 percent despite the July coup attempt and regional conflict in neighboring Syria and Iraq.