USD/TRY drops to 2-day lows near 7.8500

  • USD/TRY adds to Wednesday’s losses around 7.85.
  • The CBRT Minutes confirms the recent orthodox turn in monpol.
  • Turkey’s Economic Sentiment and the CBRT FSR are due on Friday.

The Turkish lira advances further and forces USD/TRY to drop to 2-day lows in the 7.85 region on Thursday.

USD/TRY upside looks capped above 8.0000… for now

USD/TRY is down for the second consecutive session, extending the rejection from weekly highs near 8.05 recorded earlier in the week (November 24).

In its minutes from the latest monetary policy meeting, the CBRT stressed the return to the orthodoxy in monetary policy and confirmed the new market-friendly approach. On this, it is worth recalling that the central bank will only use the One-Week Repo Rate as the main policy tool from now on.

Extra buying interest around the lira emerges on Thursday after news cited the new economic team plans to lift restrictions weighing on the currency, particularly those regarding foreign banks and could include easing limits on currency swaps. The move mainly aims at re-building the depleted stock of the country’s FX reserves and increase transparency in the markets.

So far this year, Turkey’s FX reserves dropped by more than $82 billion (or 22%) and by half when comes to net reserves. Net reserves fell to the negative territory, however, if money borrowed from local banks via swaps are excluded.

USD/TRY key levels

At the moment the pair is losing 0.65% at 7.8568 and a drop below 7.5469 (100-day SMA) would expose 7.5119 (monthly low Nov.20) and then 7.3970 (horizontal support line off August’s top). On the other direction, the next hurdle emerges at 8.0423 (weekly high Nov.24) followed by 8.5777 (all-time high Nov.6) and finally 9.0000 (psychological hurdle).

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