Turkey's lira, which has underperformed other emerging currencies this year, will mount a weak recovery through 2012, according to a Reuters poll, as a gaping current account deficit and risk aversion limits gains.
The lira has weakened 17 percent against dollar since the start of the year, falling along with other emerging market currencies. Investors shunned emerging market assets due to fading hopes for a rapid solution to the eurozone debt crisis.
The latest survey of 29 analysts showed the lira strengthening slightly to 1.82 to the dollar in three months, to 1.79 in six months and to 1.74 in a year.
The lira traded as weak as 1.8740 on Thursday morning after closing at 1.8556 on the interbank market on Wednesday.
"The lira's appreciation potential will be limited due to the high current account deficit. But the lira's current (real) undervaluation in historical comparison and the central bank's clear stance against excessive moves will limit the downside," said Sengul Dagdeviren, an economist at ING Bank.
Three months ago, the Reuters consensus was for the lira to trade at 1.64 around now, but with flight from risk the currency has come under considerable pressure in recent months, losing almost as much as 20 percent against the greenback this year.
"The lira was extremely volatile in the past 12 months. Due to the high trade deficit amount and slow down of the economy further FX shocks can be expected in the next 12 months," said Peter Vakhal, an economist at Kopint-Tarki Economic Research.
Daily forex-selling auctions have been at the centre of the central bank's response to the depreciation and it has sold more than $5 billion since it started these auctions on August 5.
Despite the central bank's aggressive intervention to stem the losses of the currency, it hit its weakest ever level against the euro/dollar basket this week.
Turkish central bank gross forex reserves fell to $85.1 billion lira on October 7 from $93 billion at end-July.
The intervention has heightened investor interest in Thursday's monetary policy committee meeting amid speculation it could take further measures to support the currency.
In a Reuters poll conducted last week, all 14 analysts polled forecast the bank would keep its policy rate at a record low of 5.75 percent. One forecast a reduction of 50 basis points in required reserve ratios (RRR) and another forecast a hike of the overnight borrowing rate.
Turkish economic growth, which surged by nearly 10 percent in the first half, is expected to slow dramatically in the next year. The central bank has said it would loosen monetary policy if the slowdown becomes more pronounced.