French bank SocGen exits short position in Turkish lira, forecasts smaller rate cuts

France-based Societe Generale (SocGen) has decided to close its short positions in the U.S. dollar/Turkish lira (USD/TRY) currency pair, following recent economic and monetary policy developments in Türkiye.

According to business-focused bloomberght.com, Phoenix Kalen, a strategist at SocGen, stated that the Central Bank of the Republic of Türkiye (CBRT) is expected to prioritize stabilizing the Turkish lira in the coming months, suggesting that the bank sees limited potential for further appreciation of the lira.

SocGen initially opened its short position in November when the exchange rate stood at 34.53 USD/TRY. A short position in this context means that the bank was betting on a strengthening Turkish lira against the U.S. dollar.

However, by closing this position, SocGen signals that it no longer expects significant lira appreciation or anticipates the currency stabilizing near current levels.

Cooling down of interest rate cuts expected

While SocGen does not anticipate a rate cut from the CBRT in April, it forecasts a 150 basis point reduction in June and a 200 basis point cut in July. The bank also projects a year-end policy rate of 35%.

Meanwhile, on Thursday, U.S-based JPMorgan announced that it would maintain its short positions in USD/TRY, despite market fluctuations.