USD/TRY climbs to 4-day highs around 16.75

The Turkish lira loses further ground and pushes USD/TRY to new multi-day highs near 16.75 on Friday.

USD/TRY remains supported around 16.00

USD/TRY advances for the second straight session at the end of the week and slowly approaches the key barrier at the 17.00 yardstick.

The pair thus continues to reclaim ground lost following the sharp drop recorded on Monday, all in response to Friday’s measure by the banking watchdog (BDDK) to shore up the domestic currency.

It is worth recalling that the BDDK banned commercial loans in Turkish lira for companies with a strong FX holdings. Companies could therefore access loans in liras by converting FX currency into the government’s currency-protected time deposits or by acquiring securities.

Moving forward, all the attention will be on Monday’s release of the June’s inflation figures tracked by the CPI (73.50% YoY prev.).

Earlier in Türkiye, the Manufacturing PMI edged lower to 48.10 in June (from 49.20).

What to look for around TRY

USD/TRY keeps digesting the recent sharp decline and subsequent rebound following Friday’s announcement by the Turkish banking watchdog.

So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine, although the effects of this new measure aimed at supporting the de-dolarization of the economy will also have its say.

Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Türkiye this week: Trade Balance (Thursday) – Manufacturing PMI (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 0.41% at 16.7509 and faces the immediate target at 17.3759 (2022 high June 23) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 16.0365 (monthly low June 27) would pave the way for a test of 15.6684 (low May 23) and finally 15.2702 (100-day SMA).