USD/TRY looks firmer, approaches monthly highs near 7.50

  • USD/TRY adds to recent gains well above 7.0000.
  • Turkey’s CPI rose 0.91% MoM, 15.61% YoY in February.
  • Turkish economy expanded 5.9% YoY in the fourth quarter.

The Turkish lira extends the pessimism for the second session in a row and lift USD/TRY to the 7.4500 region, or new 3-day highs.

USD/TRY stronger on USD-buying

The renewed buying bias around the greenback continues to hurt the EM FX universe and motivates USD/TRY to flirt with the key 200-day SMA (7.3800) and trade closer to the February highs around 7.4800 (February 26).

Recent data in the Turkish docket showed mixed results after the Manufacturing PMI eased to 51.70 in February (from 54.40), consumer prices rose at a monthly 0.91% and 15.61% from a year earlier (also for the month of February) and the economy expanded at an annualized 5.9% during the October-December period.

Despite inflation remains high, it is forecast to lose momentum in the next months, as a more stable lira in past months and the recent monetary policy decisions from the Turkish central bank (CBRT) come into play.

What to look for around TRY

The lira remains offered and manages to extend the breakout of the psychological 7.00 mark. The improved sentiment in the dollar has been undermining the lira’s momentum in past sessions, which it was sustained by the CBRT’s commitment to fight high inflation via an orthodox approach of the monetary conditions. Additionally, the CBRT appears to have regained some lost credibility/independence during the past months and this is no minor issue considering the well-known opinion of President Erdogan when comes to higher interest rates. The lira will closely follow this theme in 2021 along with the Biden’s Administration stance on Turkey, the post-pandemic recovery and occasional bouts of geopolitical effervescence.

Eminent issues on the back boiler: Potential US, EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility. Bouts of geopolitical concerns. Much-needed structural reforms. Potential impact of a third wave of the pandemic amidst the now slower pace of the economic recovery.

USD/TRY key levels

At the moment the pair is gaining 1.04% at 7.4198 and faces the next hurdle at 7.4814 (monthly high Feb.26) followed by 7.5983 (100-day SMA) and finally 8.0250 (monthly high Dec.7 2020). On the downside, a drop below 6.8923 (2021 low Feb.16) would expose 6.8796 (monthly low Aug.4 2020) and then 6.6834 (monthly low Jun.3 2020).

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