Turkey recorded a current account balance of $7.501bn in February. This was above expectations of -$7.5bn.
The February current account data is a game-changer, showing a massive $15 billion swing from the expected deficit to a strong surplus. This is the clearest sign yet that the orthodox economic policies we have seen implemented over the last couple of years are finally delivering structural improvements. For the coming weeks, we must position for a fundamentally stronger Turkish Lira (TRY).
This positive flow drastically reduces pressure on the currency, a stark contrast to the persistent deficits we saw through 2025. With the central bank’s net reserves recently turning positive for the first time in years, reaching over $15 billion, the firepower exists to support this strength. We should be looking at derivatives that benefit from USD/TRY moving lower, potentially targeting a break below the 40.00 level through call spreads or by selling out-of-the-money puts.
A stable currency will likely trigger a new wave of foreign investment into Turkish equities. The BIST 100 index, which saw gains of over 90% in 2024, could see another significant leg up as currency risk subsides for offshore funds. We should consider buying BIST 100 index futures or call options to capture this potential upside momentum.
This surplus also gives the central bank significant flexibility, shifting the market narrative from rate hikes to the timing of eventual rate cuts. This implies that the extreme risk premium embedded in Turkish assets should decrease, making it attractive to sell volatility on the lira. Selling short-dated USD/TRY strangles could be an effective way to capitalize on a period of newfound, and surprising, stability.
