USD/TRY remains offered and marks new 2022 highs near 18.15

• USD/TRY extends the advance above 18.00 on Tuesday.
• The rally in the US dollar sustains the rise in the pair.
• Turkey’s consumer confidence improved to 72.2 in August.

The persistent bullish momentum of the USD lifts the USD/TRY to the 2022 high zone, breaking the 18.00 barrier on Tuesday.

USD/TRY Rises on Dollar Buying, Heading for All-Time Highs

USD/TRY advances one more session thanks to the incessant USD bullish trend, which in turn seems reinforced by Fed tightening expectations, as well as a further rebound in US yields.

The lira, meanwhile, continues to depreciate as investors continue to weigh last week’s interest rate cut by the Turkish central bank (CBRT), despite inflation running at nearly 80% in the year through July, the highest level since 1998.

Adding downward pressure to the TRY, President Erdogan once again reiterated his opposition to the interest rate hike earlier on Tuesday, ratcheting up rhetoric that the country needs “an increase in investment, employment, production, exports and the current account surplus”… (nothing more).

Other news on Tuesday was that Minister N. Nebati suggested (hopefully) that inflation would start a strong downward correction around December after base effects and that this strong downward trend could extend into 2023.

Again: with inflation around 80% y/y in July, the central bank’s CPI forecast at 70% by the end of the year, with no sign that the war between Russia and Ukraine is going to end for the time being and with the Forecasting the energy crisis to get worse before it gets better, Nebati’s promises seem little short of impractical.

Coming back to reality, and on the national calendar, consumer confidence in Türkiye improved to 72.2 in August (from 68.0).

What to look for around the TRY

USD/TRY’s bullish bias remains unchanged and is now targeting an all-time high around 18.25 following the unexpected CBRT rate cut.

Meanwhile, the lira is expected to continue oscillating around developments in energy and commodity prices – which are directly correlated to the events of the war in Ukraine – general trends in appetite for risk and the path of the Fed rates in the coming months.

Additional risks facing the Turkish currency also come from within, as inflation shows no signs of abating (despite rising less than expected in July), real interest rates remain entrenched in negatives and political pressure for the CBRT to go for low interest rates remains pervasive. In addition, there does not seem to be a plan B to attract foreign exchange in a context in which the country’s foreign exchange reserves are decreasing day by day.

key levels

So far the pair is gaining 0.48% at 18.1164 and faces the immediate target of 18.1338 (23rd Aug high) seconded by 18.2582 (20th Dec all-time high) and then 19.00 (round level). On the other hand, a break of 17.7586 (monthly low Aug 9) would pave the way to 17.4711 (55-day SMA) and eventually 17.1903 (weekly low Jul 15).