USD / TRY hits 2021 highs near 8.4500, declines later

  • USD / TRY hits new yearly highs around 8.4500 on Tuesday.
  • President Erdogan sacked Lieutenant Governor M. Cetinkaya.
  • The focus remains on the CBRT event on April 15.

The defeat of the Turkish lira has not abated for another session, pushing the USD/TRY to new highs to date above 8.4500 at the reversal on Tuesday.

USD / TRY centered on CBRT

USD / TRY builds on recent gains and climbs to new highs near 8.5000, only to pull back somewhat shortly thereafter.

However, the bias offered in the lira remains unchanged, this time exacerbated after President Erdogan fired CBRT deputy governor M.Cetinkaya. Erdogan replaced him with M. Duman, who worked with now-Governor S. Kavcioglu at local moneylender Esbank in the 1990s.

Meanwhile, investors continue to favor the outflows of the Turkish currency amid growing concern about the start of another easing cycle by the central bank at its April 15 meeting.

Regarding the latter, it should be remembered that Governor Kavcioglu said on Monday that an interest rate cut is not guaranteed.

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 bets on a rapidly rising balance of payments crisis and a flight of foreign exchange reserves. In this context, it will not surprise anyone to see spot quotes around 10.00 in the coming months.

Key levels

Right now, the pair is gaining 0.86% at 8.2621 and faces the next bullish barrier at 8.4526 (March 30, 2021 high) seconded by 8.5777 (November 6, 2020 all-time high) and finally 9.0000 (round level) . On the other hand, a drop below 7.7772 (March 9 high) would target 7.4648 (200-day SMA) and then 7.1856 (March 19 monthly low).

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