- Turkish lira outperforms against, gains more than 3% versus the US dollar.
- USD/TRY approaches October lows, backs further away from record highs.
The USD/TRY dropped below 8.00 and accelerated to the downside, hitting at 7.8087, the lowest level since October 22. The Turkish lira continues to recover ground after falling last week to record lows.
The announcement of replacement at the Central Bank of the Republic of Turkey (CBRT) and of the Finance Minister during the weekend continues to support the lira. Another development adding to the strength of TRY was Wednesday’s announcement of an increase in the swap limited for banks.
Now attention turns to what the CBRT will do next. “The CBRT will be forced to hike next week if it wants to keep the positive TRY momentum alive. We expect the 1w repo rate to be hiked by 575bps to 16.00%”, explained strategists at TD Securities.
Technical outlook
The long-term term still points to the upside in USD/TRY, and a recovery above 8.00 could strengthen the dollar. However, for the time being, there appears to be more space an extension of the correction.
“USD/TRY has been rapidly coming off its recent 8.5814 all-time high and has so far reached the 55-day moving average at 7.8091. It is thus getting ever closer to the 7.7808 October 22 low which we expect to give way in the near future in which case a major top formation will have been confirmed. In this case the 2020 uptrend line at 7.4385 will be in focus”, wrote analysts at Commerzbank.
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