|

USD/TRY: Monetary policy stance is still not tight enough to help stabilize the lira – MUFG

Analysts at MUFG Bank, point out that the Central Bank of Turkey (CBoT) has not tighten its monetary policy enough to help stabilize the lira that continues to print record lows versus the US dollar. They see USD/TRY trading in the 8.000-9.000 range during the fourth quarter and between 7.7000-8.9000 in the first quarter of 2020. 

Key Quotes:

“Lira selling pressure has intensified after the CBoT decided against raising their key policy rate at their latest meeting. Instead, the CBoT chose to raise the late liquidity window (LLW) lending rate to 450bps above the key policy rate. The CBoT has since been criticised for not tightening monetary policy in a more conventional manner. The weighted average cost of financing at the CBoT has now risen though from a low of around 7.4% in July to almost 13.4%.”

“Market participants still want to see higher real yields on offer in Turkey although doubts remain whether they will be delivered given President Erdogan’s desire for lower rates. The need for tighter policy continues to be highlighted by the elevated rate of inflation. The annual rates of headline and core inflation were running at 11.8% and 11.3% respectively in October.”

“Downward pressure on the lira has been reinforced by rising geopolitical tensions as well including the threat of US sanctions. We expect Turkish policymakers to tighten policy more decisively in the year ahead to slow the pace of lira depreciation.”
 

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

More from Matías Salord
Share:

Editor's Picks

EUR/USD rises to 1.1800 neighborhood amid renewed USD selling and trade uncertainties

The EUR/USD pair regains positive traction during the Asian session on Wednesday and jumps to the 1.1800 neighborhood in the last hour, reversing the previous day's modest losses. The intraday move up is sponsored by the emergence of fresh US Dollar, which continues to be weighed down by persistent trade-related uncertainties.

GBP/USD remains stronger above 1.3500 following Trump’s State of the Union

GBP/USD remains in the positive territory for the fourth successive session, trading around 1.3510 during the Asian hours on Wednesday. The pair appreciates as the US Dollar remains subdued following US President Donald Trump’s first State of the Union address of his second administration before a joint session of Congress.

Gold re-attempts $5,200 amid tariffs and geopolitical woes

Gold buyers are back in the game early Wednesday after seeing a correction from monthly highs on Tuesday. The US Dollar slips after Trump’s SOTU fails to impress and as AI-driven worries ease. Dovish Fed bets also weigh.  Gold looks north so long as the key 61.8% Fibo resistance at $5,142 holds on the daily chart.

Bitcoin, Ethereum and Ripple post cautious recovery amid downside risks

Bitcoin, Ethereum, and Ripple are posting a cautious recovery on Wednesday following a market correction earlier this week.  BTC is approaching a key breakdown level, while ETH and XRP are rebounding from crucial support levels.

The Citrini report: How a debatable AI narrative can shake Wall Street

That AI-related headline alone was enough to rattle investors.US stocks slid sharply on Monday after a widely circulated Citrini Research memo outlined a hypothetical “2028 Global Intelligence Crisis”, warning that rapid AI adoption could push US unemployment into double digits as early as by mid-2028.

XRP pressured by weak ETF flows and declining retail interest

Ripple (XRP) is edging lower, trading above its intraday low of $1.32 at the time of writing on Tuesday. The decline from its weekly opening of $1.39 reflects heightened volatility in the broader cryptocurrency market, accentuated by tariff-triggered uncertainty.