- USD / TRY regains traction to the upside near 8.0000 on Thursday.
- The stronger dollar adds selling pressure to the lira.
- Turkey’s 10-year yield is approaching 20%.
The lira fades Wednesday’s optimism and resumed its decline, lifting the USD/TRY back to the vicinity of 8.0000 on Thursday.
USD / TRY faces a bigger rise in the short term
USD / TRY quickly reverses Wednesday’s small gains and returns to the upward path with the immediate target at the key 8.00 level amid dollar gains and a moderate pullback in crude prices.
In fact, the firm tone of the dollar remains good and solid and pushes the US dollar index to new highs of 2021, while the barrel of European Brent crude has fallen by around 3% after the important advance on Wednesday in the subject. of the Suez Canal.
Meanwhile, sentiment around the lira continues to deteriorate as investors want to ditch Turkish assets amid soaring rates, speculation of an inflationary spiral and bets on the next potential move by the central bank (CBRT).
What to look for around TRY
Occasional pockets of strength in the Turkish lira should be viewed as temporary only in the current political / monetary context. 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’s part once again demonstrated who 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 0.36% at 7.9512 and is facing the next bullish barrier at 8.2881 (March 22 high) followed by 8.5777 (November 6, 2020 all-time high) and finally 9.0000 (psychological level) . On the other hand, a drop below 7.7772 (March 9 high) would target 7.4450 (200-day SMA) and then 7.1856 (March 19 low).
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