- USD / TRY remains offered albeit below recent all-time highs near 8.55.
- Investors’ attention revolves around the Turkish central bank.
- A Biden victory in the US election increases the chances of sanctions.
The Turkish lira remains on the defensive and motivates the USD/TRY to stay well above 8.40 in the second half of the week.
USD / TRY looks to CBRT, US elections
USD / TRY appears to be consolidating at the upper end of the recent range, albeit below all-time highs in the vicinity of the 8.55 level (Nov 3).
Despite the fact that the sell-off of the Turkish currency seems somewhat mitigated, the pressure on the lira is far from abating amid geopolitical concerns (Eastern Mediterranean and Caucasus), domestic politics and the impact of the pandemic on the economy.
Further, investors continue to monitor the Turkish central bank (CBRT) for clues on any action on interest rates. It is worth noting that the consensus among market participants expects that the CBRT will eventually generate an interest rate hike of at least 500bp to restore some credibility to both the bank and the lira.
However, this view clashes with the Erdogan administration, which largely favors low interest rates as a way to contain inflation.
Additionally, nearly depleted foreign exchange reserves, high inflation, and negative real interest rates have contributed to TRY’s large depreciation in recent months. The outlook for the lira could darken even further considering the likelihood of US sanctions against Ankara by a likely Biden administration, all following the purchase of the Russian-made S-400 defense system.
The Turkish lira is by far the worst performing currency in the emerging market currency market, having lost around 30% against the dollar so far this year.
Technical levels
At the moment, the pair is gaining 0.35% at 8.4328 and faces the next hurdle at 8.5434 (all-time high on Nov. 3). On the downside, a drop below 7.7787 (Oct 22 low) would expose 7.6294 (Oct 1 monthly low) and finally 7.5082 (Sept 25 low).
.
Credits: Forex Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
