Bank of America (BofA) analysts indicated that the current bearish sentiment on Eastern Europe, the Middle East, and Africa (EEMEA) foreign exchange (FX) is near a record high, especially given -an exception for Turkish lira (TRY).
According to BofA asset flow data, the volume of long positions on the US dollar against emerging market (EM) currencies is the highest, which the analysts interpret as a contrarian signal that EM and EEMEA FX may start to outperform expectations, which could start from February. or March.
The report highlighted several currencies in the EEMEA region with an optimistic outlook. The Polish zloty (PLN) is expected to strengthen due to a combination of a weaker dollar, a hawkish stance from the National Bank of Poland (NBP), and positive current account inflows and foreign direct investment (FDI). The South African rand (ZAR) is also seen as supportive, with its undervaluation against the dollar set to correct in a weaker USD environment.
In Turkey, the analysts are optimistic about the lira, announcing a tight monetary policy that supports changes in the current account, which should benefit the currency. Their forecast for the TRY is much more favorable than the current rates of promotion.
The Israelis (ILS) have a neutral outlook from BofA, with forecasts aligned with forward rates for the second quarter of 2025. However, they acknowledged upside risks to the check if ceasefire agreements in the region are fully implemented.
For the Czech koruna (CZK), the report suggests that the currency is likely to perform better than positive rates suggest, as the Czech National Bank (CNB) is expected to remain cautious with its discount cycle in the short term, and a weaker dollar. additional support should be provided.
Finally, the Hungarian forint (HUF) is expected to gain strength from the second quarter onwards, bolstered by the new central bank's credible leadership and fiscal policy, along with the impact of a weaker USD.
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