- USD/TRY extends the side-lined fashion around 7.70.
- Markets’ attention remains on the key CBRT meeting.
- Consensus expects an interest rate hike of (at least) 500 bps.
The Turkish lira extends the consolidative mood for yet another session and takes USD/TRY to the 7.70 region on Wednesday.
USD/TRY looks to CBRT
USD/TRY navigates within a cautious range in the lower bound of the recent range ahead of the crucial meeting of the Turkish central bank (CBRT) on Thursday. On this regard, investors expect the CBRT to hike the One-Week Repo Rate by at least 500 bps in order to restore some credibility and stability to the beleaguered lira.
In fact, the recent rally in the lira came after important changes in both the CBRT and the Finance ministry and was later supported by market-friendly comments by President R.T.Erdogan.
Indeed, Erdogan stressed that Turkey will now look to implement much-needed structural reforms based on macroeconomic and financial stability.
It is worth recalling that the lira’s rout in the August-November period followed increased concerns of a potential Balance of Payment crisis, geopolitical concerns, negative real interest rates and a persistent and fruitless effort to prevent extra depreciation of the currency via FX reserves selling.
USD/TRY key levels
At the moment the pair is up 0.27% at 7.7052 and faces the next hurdle at 7.7959 (weekly high Nov.17) followed by 7.8281 (55-day SMA) and finally 8.5777 (all-time high Nov.6). On the downside, a drop below 7.5985 (monthly low Nov.16) would expose 7.4904 (100-day SMA) and then 72019 (low Aug21).
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