- Rebound of the lira accelerates after break of USD / TRY at 8.00.
- Banking regulator lifts restrictions to access financing in lira.
- All attention is now on the CBRT and possible rate hikes.
The Turkish lira continues to rebound after plummeting to record lows. USD / TRY recently broke below 8.00 and fell rapidly to 7.8750, the lowest level since October 22.
The 8.00 zone had become a key support, and the break of this further strengthened the lira, which resumed its recovery after Tuesday’s break.
The sudden bullish momentum in the lira comes after Erdogan replaced the governor of the Turkish central bank (CBRT) on Saturday and Treasury and Finance Minister B.Albayrak resigned on Sunday, giving the impression that Turkey will implement changes in economic driving, with the aim of restoring credibility.
The Wednesday’s better tone in the lira comes after the banking regulator moved towards a normalization of market conditions. That said, foreign investors will now have access to lira financing through a greater number of currency swaps and derivative deals between local banks and their foreign counterparts.
Meanwhile, all eyes are now on next week’s CBRT meeting, where the consensus sees an interest rate hike as the most likely decision. To be considered serious and credible, such a move by the CBRT must be at least 500 bp, some analysts estimate.
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Credits: Forex Street
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