USD/TRY Update (15th November 2021)

USDTRY is now trading at 10.03.

The pair broke through all the key resistance levels and even the psychological barrier of 10.00 as the global Dollar strength continues relentlessly. The persisting US inflation is a major risk factor for the Lira. Expectations that the CBRT would cut another 100 bp in repo rates this week have fueled the Lira weakness. While the Turkish government is saying that the economy is picking up steam and the current account would be within 2% soon, markets seem to believe that the government wants a weak Lira and would prop up the export economy by sacrificing the currency in the short term.

The next leg of the move is towards 10.16 levels and then towards the 10.30 range. But, if the global Dollar momentum stalls or reverses, the resistance on the downside for the Lira would be 10.00, then 9.94 and then 9.75. The bias clearly remains towards depreciation of the Lira over the medium-term, but given the sharp move until now, there could be some days of Lira appreciation if the global scenario is favorable.

USD/TRY Update (11th November 2021)

USDTRY is now trading at 9.94, post the Dollar surge yesterday. US October CPI came in at 6.2% compared to last year. The data print is higher than all estimates and hence led to a sharp rise in yields. Markets are now worried that the Fed would be forced to move on rate hikes in 2022 itself. Dollar Index has reached close to 95, and TRY reflected this Dollar strength by breaching the previous high.

USDTRY is now on track towards 10.00, but the pace would depend on the global Dollar performance and US yields. Risk aversion in equity markets is yet to take shape, though it is a matter of time. Given that Lira has depreciated significantly despite the healthy risk appetite globally (JPY weakening is a sign of good risk appetite), the Turkish currency is one of the most vulnerable ones to the next leg of Dollar move. The short-term appreciation potential for Lira has diminished significantly post the US CPI data.

USD/TRY Update (9th November 2021)

USD/TRY is now trading at 9.7 despite the positive environment in global markets. FOMC’s decision to taper but downplay the rate hike and inflation scenarios have led to a fall in US yields. TRY failed to benefit much from the lower US yields, as domestic inflation concerns and fears of a monetary policy mistake remain more important now. Turkey’s inflation is just shy of 20%, and the currency cannot sustainably appreciate in such an environment.

USDTRY consolidated around the 9.8 level making it a resistance zone. The pair could move a bit lower from here in the short term, given that the momentum of Dollar strength has abated for now.  But the upside to the Lira will be limited and can potentially be up to 9.4 if global risk appetite and the reversal in the Dollar strength continue. The medium-term risk of a move towards 10.00 remains very much tangible.

USD/TRY Update (3rd November 2021)

USDTRY is back above 9.60 levels and is currently at 9.63. Post Monday’s meeting between the Turkish President and the US President, there was some hope for the Lira, as the Dollar was also a bit calm. But, the Dollar Index is back above 94 ahead of the FOMC. Turkish inflation data expected today is poised to show a print of 20%+ for October. Lira is now weak in this backdrop.

Today’s FOMC is critical for the Lira and if FOMC signals taper and rate hikes firmly, TRY would be the first currency to react to the ensuing USD strength. In this scenario, 9.8+ is likely soon. On the other hand, if USD weakens post the FOMC, the downside to USDTRY is limited, unless the Turkish inflation also comes much lower than expected. The range for TRY has shifted to 9.4-9.8 in the short-term with a bias upwards.

USD/TRY Update (28th October 2021)

In a relative day of quiet yesterday, TRY appreciated again on the lack of market-moving news and weakness in USD. USDTRY moved down to 9.46 before reversing again to 9.52 today tracking the Dollar movement. US yields fell yesterday, helping the Lira. The short-term might look stable for the Turkish currency, but the long-term outlook remains bleak. Markets are worried about how the actions of the central bank in their rate cuts, and of the President in the relationship with the west would impact the economy and the currency.

 USDTRY must breach 9.41 before it can head lower towards 9.20 level. With the US PCE data coming up tomorrow and the FOMC due next week, USDTRY can be very volatile depending on the behavior of the Global Dollar. The scale is still tilted towards the Lira depreciation side, though the short-term appreciation moves can be sharp.

USD/TRY Update (27th October 2021)

USD/TRY saw a mild pullback from Monday’s highs of 9.8+ and is now settled around 9.54. With the Dollar strength holding across currencies, it seems that there is limited upside to the Lira in the short-term. As no major data releases are on offer today, one can expect some stability in the Lira level. Tomorrow’s USD PCE inflation data could be important for the overall Dollar trend.

 The next major focal point would be the FOMC meeting on November 1^st week. If the FOMC acknowledges the high inflation trajectory and talks more hawkish, Lira can continue on the path of depreciation towards 10.00. But, if the FOMC downplays the taper decision leading to pullback in the global Dollar, one might see some downside to USDTRY towards the 9.15-9.2 range. All depends on events in the next week to 10 days.

USD/TRY Update (22nd October 2021)

USD/TRY shot up to 9.53 yesterday after the CBRT surprised the most dovish of market analysts by cutting the repo rate by 200 basis points. The current repo rate is down to 16% from 18% earlier. The consensus was that the rate cut would be between 50 to 100 bp. The sharp move in TRY shows market’s shock about the rate cut, especially when the inflation continues to run at 17-18%. The central bank said that temporary supply-side factors are contributing to inflation and would reverse.

The clear message from the central bank is that Lira would be left to fend for itself. The shock move could stall whatever momentum TRY built due to the reversal in Dollar strength. We can now expect to move towards 9.6 and then towards the 9.8-10 range eventually. Of course, global Dollar strength has waned and can help slow the depreciation in Lira. But, the range has now shifted upwards between 9.25 and 9.6 in the short-term

USD/TRY Update (21st October 2021)

USD/TRY has been on the upswing for the past one month, first due to the global Dollar strength and then due to the Turkey specific factors related to the central bank. The sharp move from 8.65 to 9.14 was a direct result of the strength in the Dollar on the back of FOMC taper expectations. TRY has been one of the most vulnerable currencies against the Dollar and has historically reacted the most to any Dollar strength wave. The next phase of the move from 9.14 to 9.36 (all-time high) was the result of the firing of the Central Bank officials.

 USD/TRY has retraced some of the gains and is now around the 9.2450 mark, primarily due to the pullback in the global Dollar. Given that the Dollar is relatively weak, there could be some more downside to USD/TRY, but limited in our view. Today’s CBRT decision on rates is being watched for any potential rate cuts. The market consensus is for a rate cut of 100 bp. If the Repo rate is cut, then USDTRY can find bottom soon around the 9.14 mark. But if the central bank surprises with a hold, we can expect TRY to strengthen to 9.12 support (10-day moving average) first and look to break it. The potential downside in this scenario could be up to 9.05.

 The medium-term outlook for the Lira remains bleak. Once the Fed starts the taper, all risk currencies would be under continual pressure, and Lira would be vulnerable given the domestic monetary situation. We expect TRY to eventually break 9.36 again and potentially go towards 9.6+ in the coming months.