- The USD / TRY rally lost steam before 8.4000.
- CBRT’s Kavcioglu advocated a tight monetary stance for now.
- The one-week buyback rate will be the main monetary policy tool.
The Turkish lira depreciated to around 8.4000 against the dollar during early trading, although it regained some composure afterwards and dragged the USD/TRY to the current region of 8.3000.
USD / TRY still attentive to CBRT
USD / TRY is now struggling for direction after encountering some resistance at the 8.4000 zone early Wednesday, at the same time attempting to halt the 4-day positive streak thus far.
Investors, meanwhile, are keeping negative sentiment on the lira unchanged amid mounting speculation about the resumption of the relaxed stance by the Turkish central bank (CBRT) as early as their next meeting in April.
Still around the CBRT, Governor Kavcioglu said the central bank hopes to maintain the status quo around monetary conditions, while confirming that the one-week repurchase rate is the main monetary policy tool amid the renewed promise. to reduce inflation to 5%.
Previously, in Turkey, the trade deficit widened to $ 3.3 billion in February and the Economic Confidence Index improved to 98.90 in March (from 95.80).
What to look for around TRY
The short-term outlook for the lira remains fragile, to say the least. 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 President Erdogan once again demonstrated that hand is shaking the monetary cradle in Turkey and will likely be the prelude to a return to unorthodox / looser monetary policy measures in combination with rapidly rising bets on 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 shedding 0.07% at 8.3027 and a drop below 7.7772 (March 9 high) would target 7.4724 (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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