July 22 (Bloomberg) -- The lira, this year’s worst- performing emerging-market currency, may weaken 9.3 percent to an all-time low against the dollar, according to Citigroup Inc.’s analysis of trading patterns.
The Turkish currency headed for its lowest close since March 2009 and the ISE National 100 Index of stocks fell for a seventh day in its longest declining streak in almost three years after Fitch Ratings said Turkey’s record current-account deficit is causing “uncertainty” on its outlook for an investment-grade rating.
The lira, which hit a record low of 1.8066 per dollar in March 2009, rallied and retreated three times, reaching 1.6784 today. This completes a “head-and-shoulders,” which occurs when a price forms three consecutive peaks of valleys, the middle being the largest, according to Citigroup.
“The completed reverse head-and-shoulders pattern on dollar/lira continues to suggest further dollar strength and eventual test of 1.85, which converges with the trend across the major multi-year highs,” Citigroup said in a research note received late yesterday.
The lira lost 0.5 percent to 1.6784 per dollar as of 1:45 p.m. in Istanbul, a drop of 1.5 percent this week. The ISE National index slid 0.5 percent to 60,610.97, a retreat of 3.2 percent so far this week.
Any further declines could be exacerbated if the index breaches the support level of 58,000, Citigroup said. A support level indicates a price at which buy orders may accumulate and help and asset rebound. The ISE 100 touched 58,664.24 March 2.
A breach of the 58,000 would take the gauge “outside of its range-bound price action, opening the way for lower levels,” according to the note.
The lira and Turkish stocks slumped today even as the MSCI Emerging Markets Index and most developing-nation currencies rallied after European leaders yesterday pledged more aid for Greece, bolstering demand for riskier, emerging-market assets.
Citigroup sees the lira depreciating to 1.71 per dollar in the third quarter, versus a median estimate of 1.58 of 21 banks polled by Bloomberg.
--Editors: John Kohut, Gavin Serkin.
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