Swiss bank UBS is recommending clients sell the South African rand and buy the Turkish lira, citing a technical signal that suggests profits are in store.
The rand has gained more against the dollar than any other currency this year, rising 7 percent, and has risen 5.1 percent against the lira. That increase means the short-term average for the lira-rand exchange rate has increased above its long-term mean for the first time in more than a year, Bloomberg's Colleen Goko reported.
While both currencies have benefitted from a more neutral outlook from the U.S. Federal Reserve towards interest rates, the Turkish central bank's hawkish stance on monetary policy gives support to the lira in the short term, she said, citing UBS strategists Tilmann Kolb and Jonas David.
JPMorgan and Bank of America have tried the same trade in the past without success, Goko reported.
"The rand has significantly outperformed, but we see limited room for this trend to extend and expect some reversal, driven by both global and domestic factors," Kolb and David said.
Turkey's central bank kept its interest rate on hold at 24 percent last month despite a slowdown in December inflation to 20.3 percent from a 15-year high of 25.2 percent in October. It indicated that it won't cut rates at another meeting in March, despite local elections later that month.