USD/TRY recedes from 2021 tops around 8.3000
|- USD/TRY advanced sharply to new YTD peaks near 8.3000.
- Sellers are poised to dominate the near-term stance in TRY.
- President Erdogan sacked Governor Agbal late on Friday.
Some things never change… As broadly expected, the Turkish lira plummeted to new multi-month lows vs. the US dollar at the beginning of the week, lifting USD/TRY to the vicinity of the 8.3000 level, or new yearly highs.
USD/TRY sharply higher on CBRT news
The lira succumbed to the selling impetus on Monday in response to President Erdogan’s decision to remove the former CBRT Governor N.Agbal over the weekend.
Erdogan’s unexpected (?) move came soon after former Governor Agbal caught markets off guard on Thursday and hiked the One-Week Repo Rate by 200bps to 19.00% vs. expectations for a hawkish-hold or even a 100bps hike.
Following the move by the CBRT on Thursday, the lira managed to regain the 7.20 region at the end of last week, clinching at the same time fresh 3-week highs vs. the buck. In the wake of the decision by President Erdogan, USD/TRY now targets the all-time highs in levels just shy of the 8.6000 mark recorded on November 6th.
What to look for around TRY
The sharp depreciation of the lira vs. the dollar was largely anticipated by market participants after President Erdogan’s decision to replace N.Agbal with S.Kavcioglu at the realm of the CBRT. Kavcioglu, another “believer” in Erdogan’s unrealistic view that higher rates fuel inflation, is expected to reverse (wipe out) the shift to an orthodox monetary policy stance that was (successfully) implemented by former Governor N.Agbal back in November 2020. The appointment of Kavcioglu will most likely prelude the return to unorthodox/looser measures of monetary policy in combination with rapidly rising concerns of a balance of payments crisis and a drain of FX reserves.
Key events in Turkey this week: March’s Capacity Utilization (Friday).
Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic.
USD/TRY key levels
At the moment the pair is up 9.56% at 7.8871 and faces the next up barrier at 8.2881 (2021 high Mar.9) followed by 8.5777 (all-time high Nov.6 2020) and finally... the moon?. On the downside, a drop below 7.1856 (monthly low Mar.19) would aim for 7.0000 (psychological level) and then 6.8923 (2021 low Feb.16).
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.