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USD/TRY finds support around the 6.00 handle, focus on CBRT

  • USD/TRY extends the sideline theme around the 6.00 handle.
  • The CBRT resumed its One-Week Repo auctions today.
  • Geopolitics, domestic politics keep weighing on TRY.

The Turkish Lira is prolonging the choppy trade so far this week and is now lifting USD/TRY to the boundaries of the 6.10 mark, where sellers remain clustered.

USD/TRY bid after CBRT announcement

TRY is facing renewed downside pressure on Tuesday following a solid demand for the greenback, geopolitical jitters and the recently announced decision by the CBRT to resume its repo rate auctions.

In fact, the Turkish central bank (CBRT) announced earlier in the European morning that it will resume its auctions of the One-Week Repo Rate at 24.0%, lowering the rates by 150 bps. It is worth recalling that the central bank suspended its auctions a couple of weeks ago in an attempt to prevent a sharp depreciation of the Lira and amidst increasing financial effervescence, forcing banks to obtain funds at the overnight rate at 25.5%.

In addition, TRY remains vigilant on escalating tensions between US and Iran while the run up to the new municipal elections in Istanbul on June 23 stays in centre stage on the domestic front.

What to look for around TRY

Volatility around the Turkish Lira has subsided somewhat as of late, although the broader sentiment around the EM FX space should continue to influence on the currency as well as tensions on the US-China trade front. In addition, friction between the AKP and its main opposition party ahead of the municipal elections in Istanbul is also emerging as another source for Lira volatility. Further out, potential US sanctions following the purchase of the Russian missile defence system keeps lingering over the country as well as sanctions over Iranian crude oil exports. Adding insult to injury, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the Erdogan’s administration and bank’s authorities.

USD/TRY key levels

At the moment the pair is gaining 0.64% at 6.0621 and faces the next hurdle at 6.1311 (high May 13) seconded by 6.2457 (2019 high May 9) and then 6.8353 (high Aug. 30 2018). On the other hand, a breach of 5.9472 (low May 10) would aim for 5.7094 (low Apr.17) and finally 5.6579 (200-day SMA).

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