- USD / TRY adds to Wednesday’s losses near the 8.1200 level.
- The CBRT official said there will be no premature rate cut.
- Speculation about an interest rate cut dominates the mood around TRY.
The Turkish lira keeps renewed buying interest unchanged and drags the USD/TRY to the area of multi-day lows near 8.1200 on Thursday.
USD / TRY found resistance near 8.50
USD / TRY loses ground for the second consecutive session on Thursday, and is under some selling pressure after hitting new 2021 highs near 8.5,000 earlier in the week.
The renewed buying interest around the Turkish currency seems to find oxygen in recent comments from CBRT officials. In fact, a senior CBRT official ruled out a premature rate cut early in the session Thursday.
Furthermore, Governor Kavcioglu reiterated to investors that the central bank will maintain current monetary policy conditions, adding that a strict policy is needed to combat the current high inflation.
On the agenda, Turkey’s manufacturing PMI improved to 52.60 in March (from 51.70).
So far, the lira has depreciated nearly 14% since Erdogan fired former CBRT governor N. Agbal on March 19.
What to look for around TRY
The short-term outlook for the lira remains fragile. The new CBRT Governor, S. Kavcioglu, is expected to reverse (eliminate) the shift to a market-friendly approach to monetary policy that was successfully implemented by former Governor N. Agbal in November 2020. Kavcioglu’s appointment by the President Erdogan once again demonstrated who is shaking the monetary cradle in Turkey and will most likely be the prelude to a return to unorthodox / looser monetary policy measures in combination with rapidly rising bets of a balance of payments crisis and a flight of foreign exchange reserves. In this context, it will come as no surprise to see TRY trading around 10.00 in the coming months.
Key levels
At the moment, the pair is retreating 1.20% to 8.1352 and a drop below 7.7772 (March 9 high) would point to 7.4785 (200-day SMA) and then 7.1856 (March 19 monthly low) . On the positive side, the next barrier is located at 8.4526 (maximum of March 30) seconded by 8.5777 (historical maximum of November 6, 2020) and finally 9.0000 (round level).
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