- USD / TRY adds to Tuesday’s losses and is approaching 7.50.
- Turkey’s seasonally adjusted unemployment rate was 12.2%.
- Inflation figures for the United States disappointed expectations in February.
The Turkish lira extends its bullish momentum and drags the USD/TRY near 7.50, or 2-day lows, on Wednesday.
USD / TRY down due to the sale of USD
USD / TRY is down for the second session in a row after hitting 2021 highs recently in the vicinity of the 7.80 level.
The renewed selling bias of the greenback due to the fall in US yields favors the return of inflows to the currency space of emerging markets, where the Turkish lira is one of the main beneficiaries due to its high real interest rates .
On the domestic agenda, the Unemployment Rate in Turkey marked the lowest at 12.2% during January (from 12.6%), while the Employment Rate improved to 43.8% (from 42.6%).
In the US data space, the headline CPI was up 0.4% month-on-month and 1.7% year-on-year through February, while the core CPI was up 0.1% month-on-month and 1.3% year-on-year.
What to look for around TRY
The lira gains a new upward traction and drags the USD / TRY to the 7.50 region, following the weakness of the dollar and despite concerns about the ability of the central bank to curb inflationary pressure. In the latter, investors continue to watch the CBRT closely, as the probability of a rate hike at the next meeting has started to accelerate. Improving sentiment in the dollar has been undermining the lira’s momentum since late February, which was underpinned by the CBRT’s commitment to combat high inflation through an orthodox approach to monetary conditions. Furthermore, the central bank appears to have regained some lost credibility / independence over the past few months and this is no small problem considering President Erdogan’s well-known opinion when it comes to higher interest rates. The lira will closely follow this issue in 2021 alongside the Biden Administration’s stance on Turkey, the post-pandemic recovery and occasional bouts of geopolitical effervescence.
Key levels
Right now, the pair is shedding 0.88% at 7.5362 and a drop below 7.4001 (200-day SMA) would target 7.2197 (March 1 monthly low) and then 6.8923 (February 16 low). On the other hand, the next obstacle is located at 7.7772 (maximum of March 9, 2021) followed by 8.0250 (monthly maximum of December 7, 2020) and finally 8.0423 (maximum of November 24, 2020).
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