- USD / TRY quickly leaves the key 8.0000 level behind.
- Turkey’s manufacturing confidence rose to 110.8 in March.
- Rumors about the balance of payments crisis have accelerated.
The Turkish lira remains in the offered territory and raises the USD/TRY to daily highs well above the critical 8.0000 level.
USD / TRY faces upside potential
The USD / TRY rises for the second consecutive session and surpasses the 8,000 level at the end of the week, as the outflows of the Turkish currency do not decrease.
In fact, the pair managed to hit daily highs near 8.1000 early in the session, only to lose some ground afterwards.
Meanwhile, the outlook for the lira is expected to deteriorate rapidly in the short / medium term, as speculation of a balance of payments crisis continues to accumulate with forecasts of lower rates amid higher inflation, all in the context of a crisis and a fragile banking system that will face additional pressure in the coming weeks.
So far, the lira has lost around 10% since Monday’s open, although it managed to regain some gains after falling to fresh 4-month lows against the dollar near 8,3000 earlier in the week.
Earlier in the session, Turkey’s capacity utilization fell slightly to 74.7% in March (from 74.9%) and manufacturing confidence improved to 110.8 (from 109.3) during the same period.
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 proved once again 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 1.02% at 8.0094 and faces 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 7.4507 (200-day SMA) and then 7.1856 (March 19 monthly low).
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