USD/TRY resumes the upside and revisits 13.60 and above

The Turkish lira gives away part of recent gains and lifts USD/TRY to the area above the 13.6000 level on Friday.

USD/TRY remains largely side-lined

USD/TRY trades with decent gains following two consecutive daily pullbacks, as market participants seem to have fully digested Thursday’s monetary policy meeting by the Turkish central bank (CBRT).

The daily uptick in the pair comes in response to the recovery in the greenback amidst persistent concerns around the Russia-Ukraine conflict.

It is worth recalling that there were no surprises at the CBRT event on Thursday, where the central bank left the One-Week Repo Rate unchanged at 14.00% for the second consecutive month and despite inflation rose to nearly 50% in the year to January. The CBRT, however, defended its efforts to support the “liraization” strategy.

In the domestic calendar, Turkey’s Consumer Confidence deflated a bit to 71.2 in February (from 73.2).

What to look for around TRY

The pair keeps its multi-week consolidative theme well in place around the mid-13.00s. While skepticism keeps running high over the effectiveness of the ongoing scheme to promote the de-dollarization of the economy, the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are expected to maintain the lira under scrutiny for the time being.

Key events in Turkey this week: Consumer Confidence (Friday).

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. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.48% at 13.6385 and a drop below 13.4317 (weekly low Feb.11) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.6767 (weekly high Feb.15) seconded by 13.9319 (2022 high Jan.10) and then 18.2582 (all-time high Dec.20).