USD/TRY looks firmer and climbs to 3-day highs near 14.80

The Turkish lira loses ground vs. the greenback for the second session in a row and lifts USD/TRY to fresh peaks near 14.80 on Friday.

USD/TRY up on geopolitics, USD demand

USD/TRY adds to Thursday’s gains in response to the strong rebound in the US dollar, mainly following the deterioration of the Russia-Ukraine scenario after peace talks failed to yield some serious progress on Thursday.

In addition, the recent inaction by the Turkish central bank (CBRT) seems to be hurting the lira after it left the policy rate unchanged and announced no measures to tackle the current elevated inflation on Thursday’s event.

Against the ongoing backdrop of soaring energy prices and being Turkey a major energy-importer country, this could only exacerbate the upside pressure in consumer prices going forward, which can also be a prelude to a currency crisis.

What to look for around TRY

The lira eases some ground and trades closer to the area of YTD lows vs. the US dollar. In the very near term, 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 Russia-Ukraine peace talks. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of easing, real interest rates remain negative and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

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. Structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is gaining 0.77% at 14.7886 and a drop below 14.5217 (weekly low Mar.15) would expose 13.7063 (low Feb.28) and finally 13.5091 (low Feb.18). On the other hand, the next up barrier lines up at 14.9889 (2022 high Mar.11) seconded by 18.2582 (all-time high Dec.20) and then 19.00 (round level).