USD/TRY: A sustained break in below 8.00 seems unlikely – Credit Suisse
|Economists at Credit Suisse stick to the view that USD/TRY will move to levels above its all-time high (8.58) in 2Q 2021. At the same time, they think the price action in USD/TRY will remain directionless in the short run amid possible FX market intervention by the central bank.
The risk to USD/TRY still seems to us skewed towards the upside
“A move in USD/TRY to levels above the all-time high of 8.58 is highly likely to materialize during the course of the current quarter. This view is based on expectations of an increase in depreciation pressure on the lira from the financial account side, via cross-border outflows from TRY-assets and possible dollar-buying by locals as markets question the monetary policy outlook, and at a time when the current account deficit remains relatively large.
“The central bank seems set to smooth USD/TRY upside via intervention in the FX market. Erdogan’s green light for such intervention and the fact that state-owned banks’ foreign exchange position is substantially higher now than it was in early August suggest that dollar demand from the financial account of the balance of payments will be met with central-bank-orchestrated FX sales for now. This should keep TRY weakness in check, but also leave USD/TRY subject to intraday volatility.
“In the case that USD/TRY does manages to break above all-time high of 8.58 in the short run we expect resistance at rounded levels, such as 8.70 and 8.80.”
“We think that a sustained break in USD/TRY below 8.00 is not on the cards, even if the central bank stays on hold at its meeting next week (6 May).”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.