The Zhitong Finance App learned that Bank of America strategists said that among Eastern European, Middle Eastern and African currencies, the Turkish lira is the best choice. They believe that it is possible to get a return of nearly 10% through an arbitrage trading strategy.

Borrowing dollars and investing in lira has become a popular deal this year as investors are confident in Turkey's efforts to reduce inflation and return to more traditional economic policies. Bank of America strategists, including Mikhail Liluashvili, advised investors to buy lira forwards, as increased summer travel revenue boosted the country's fiscal situation.

They wrote in a report: “We are doing lira due to high interest spreads, favorable current account seasonality, and a tight monetary environment.”

After Turkey implemented a series of unorthodox measures a few years ago, arbitrage trading of the country's assets was largely abandoned by investors, but in the past few months, arbitrage trading has made a comeback as Turkey raised interest rates sharply after promising to reverse the country's traditional economic policies. According to compiled data, over the past six months, the lira was the best performing arbitrage transaction in emerging markets, with an increase of 13%.

However, Bank of America strategists warned against buying lira in large numbers, as this strategy could be at risk if the market experiences an unexpected shock. For some investors, they wrote, Turkish government bonds may be more attractive.

Additionally, Citigroup strategists said that Turkey's assets are on the verge of a “moment of recovery.” Analysts, including Luis Costa, said that the performance of the Turkish lira and bonds will mainly depend on whether the central bank can successfully re-anchor inflation expectations.