- USD / TRY extends the rally near the 14.00 level.
- The lira falls further after N. Nebati’s comments in the middle of the week.
- Investor attention remains on the CBRT event on January 20.
Another day, another fall of the lira. This time, the depreciation of the Turkish currency raises the USD/TRY near the 14.00 level, challenging the zone of yearly highs at the same time.
USD / TRY rises on strong US yields, weak lira
USD / TRY has been trading higher since Tuesday due to the upward movement of US yields and the increasing depreciation of the national currency, which has particularly exacerbated its losses following the 19-year high in Turkey’s inflation figures. It is worth remembering that consumer prices followed by the CPI increased beyond 36% in December compared to the same month in 2020.
An additional hit to the lira (as if necessary) came after Finance Minister N. Nebati said on Wednesday that the country will now abandon orthodox policies when it comes to tackling rampant inflation, shifting instead to “unorthodox policies” (or whatever that means) as the country will now chart its own course.
Other news from Reuters agency quoted President Erdogan as saying that “from now on, it is time to reap the benefits of our efforts, to show our people that we are getting closer to our goals.”
Meanwhile, the lira lost nearly 45% in 2021 against the US dollar, making it one of the worst performers over the past year. Furthermore, since the Turkish central bank (CBRT) started its easing cycle in mid to late September, the TRY has lost around 33%.
What to look for around TRY
The lira resumed its downtrend as market participants continue to absorb recent inflation figures and the government’s plan to protect local currency deposits. The reluctance of the CBRT to change course (collision?) And the ubiquitous political pressure to favor lower interest rates in the current context of rampant inflation and (very) negative real interest rates are forecast to keep the lira sharply low. pressure for the moment. With that said, another visit to the all-time high above USD / TRY 18.00 should not be ruled out for now.
Technical levels
So far, the pair is gaining 0.91% at 13.7531 and a drop below 12.7523 (Jan 3 weekly low) would pave the way for a test of 11.8918 (55-day SMA) and finally 10.2027 (Jan 3 monthly low). December 23th). On the other hand, the next rising barrier is lined up at 13.8967 (Jan 3 high) followed by 18.2582 (Dec 20 all-time high) and then 19.0000 (round level).
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