- USD/TRY is advancing to new highs north of 5:00 PM.
- The lira has depreciated by more than 30% since the start of the year.
- The CBRT meets later in the week to decide on rates.
The Turkish lira falls to new lows against the greenback and pushes USD/TRY to new highs for the year around 17.3500 on Tuesday.
USD/TRY Strengthens Ahead of CBRT Event
The selling pressure around the Turkish currency is accelerating on Tuesday and is motivating USD/TRY to add to gains seen earlier in the week further north of the 17.00 mark.
The spot rise comes despite the proposed stance on the greenback and follows the usual concerns over the lira and the inability of the government and/or the Turkish central bank (CBRT) to fight inflation and restore somehow some credibility to the embattled currency.
On the latter, the CBRT meets Thursday amid consensus for another “pending” decision despite inflation at over 70% year-on-year in May.
Additionally, the lira depreciated by more than 30% and remains the worst emerging market performer so far this year. It should be remembered that the currency lost 44% against the US dollar in 2021.
What to look for around TRY
USD/TRY maintains the underlying bullish bias well and solidly and is now above the 17.00 mark, an area last traded in December 2021.
So far, the Turkish currency’s price action is expected to revolve around the performance of energy prices, general risk appetite trends, the Fed’s rate path and market developments. the war in Ukraine.
The additional risks TRY faces also come from the domestic backyard, as inflation shows no sign of abating, real interest rates remain anchored in negative numbers and political pressure to keep the CBRT tilted to the upside. low interest rates remain pervasive.
Main events in Turkey this week: Consumer Confidence (Wednesday) – CBRT Interest Rate Decision (Thursday) – Capacity Utilization, Manufacturer Confidence (Friday).
Significant problems on the rear boiler: Foreign exchange intervention by the CBRT. Progress (or lack thereof) of the new government program to support the lira via protected term deposits. Constant pressure from the government on the CBRT in relation to the credibility/independence of the bank. Geopolitical crises. Structural reforms. Upcoming presidential/parliamentary elections.
USD/TRY key levels
So far the pair is gaining 0.16% to 17.3433 and facing the next upside barrier at 17.3499 (21st June 2022 high) followed by 18.2582 (20th Dec all time high) then from 19.00 (round level). On the other hand, a break of 16.3136 (June 3rd monthly low) would target 16.1431 (May 27th low) and finally 15.6684 (May 23rd low).