USD/TRY in all-time tops near 8.00 on steady CBRT

The Turkish lira has quickly faded earlier gains and now lifts USD/TRY to new all-time peaks close to the 7.98 level.

USD/TRY up post-CBRT rate decision

TRY abruptly reversed the initial optimism and debilitates to fresh all-time lows vs. the greenback after the CBRT left its benchmark interest rates unchanged at its meeting on Thursday.

In fact, the central bank kept the One-Week Repo Rate unchanged at 10.25%, the Overnight Borrowing Rate at 8.75% and the Overnight Lending Rate at 11.75%, all against markets’ consensus for an interest rate hike of at least 100 bps.

The central bank stays reluctant to increase the key interest rates – against the broad market consensus - on the back of its (absolutely wrong) conviction that lower rates go hand-in-hand with lower inflation. This view is very well supported by the Erdogan government and it is worth recalling that the refusal to reduce rates was the main reason behind former CBRT Governor M.Cetinnkaya’s dismissal.

On the geopolitical front, Turkey – and the lira - remains under the microscope regarding its direct conflict with Greece in the Eastern Mediterranean and its probable involvement in the current Armenia-Azerbaijan effervescence.

The lira rapidly left behind recent gains, particularly after Turkey announced a gas discovery at its Sakarya natural gas field off the Black Sea coast on Wednesday. Indeed, this discovery should impact on the country’s dependence of Russian, Iranian and Azeri energy imports.

USD/TRY key levels

At the moment the pair is gaining 1.75% at 7.9432 and faces the next hurdle at 7.9791(all-time high Oct.22). On the downside, a drop below 7.7787 (monthly low Oct.22) would expose 7.5689 (55-day SMA) and finally 7.5082 (low Sep.25).