USD/TRY climbs to multi-week highs near 14.0000

The Turkish lira depreciates further and motivates USD/TRY to clinch fresh 6-week tops around 13.9000 on Tuesday.

USD/TRY now targets 14.0000

USD/TRY advances for the third session in a row and extends the positive start of the week despite the greenback now sheds initial gains on the back of renewed inflows into the risk-associated universe.

However, further deterioration in the geopolitical scenario sent prices of the European reference Brent crude to the area just below the psychological $100.00 mark per barrel earlier in the session, just to give away part of those gains afterwards. On this, it is worth recalling that Turkey is a large oil-dependent economy, and higher oil prices are expected to morph into extra inflationary pressures and hurt households’ confidence.

The offered stance in the lira comes in tandem with further consolidation in yields of the Turkey 10y bond around the 20% area.

In the Turkish calendar, Capacity Utilization eased a tad to 76.6% in February (from 77.6%) and Manufacturing Confidence ticked higher to 109.8 (from 109.5) also for the current month.

What to look for around TRY

The pair attempts to break above its multi-week consolidative theme and approaches the 14.00 mark. The lira, in the meantime, remains surprisingly stable so far this year, particularly after the government announced a lira time-deposit protected scheme in late December and after the CBRT left the policy rate unchanged in the last couple of meetings. However, the lira is expected to remain under scrutiny amidst rampant inflation, negative real interest rates and the omnipresent political pressure to favour lower interest rates.

Key events in Turkey this week: Capacity Utilization, Manufacturing Confidence (Tuesday) – Economic Confidence Index (Friday).

Eminent issues on the back boiler: 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. Much-needed structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 1.19% at 13.8299 and a drop below 13.4317 (weekly low Feb.11) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.9013 (monthly high Feb.22) seconded by 13.9319 (2022 high Jan.10) and then 18.2582 (all-time high Dec.20).