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The changes in the central bank’s management over the weekend abruptly put an end to the shift-to-orthodoxy narrative which has been in place since early November. In the very short run, economists at Credit Suisse see scope for USD/TRY to trade within the 7.70-8.30 range, but a break above all-time highs of 8.58 in Q2 2021 looks likely.

Key quotes

“In the very short run, we see scope for USD/TRY to trade within the 7.70-8.30 range as front-end FX rates remain abnormally elevated and as authorities deploy FX sales to smooth the pressure on the lira from cross-border outflows.  

“While a range-trading in USD/TRY in the very short run is possible, the developments over the weekend create asymmetrical upside risk to USD/TRY. A break above all-time highs of 8.58 in 2Q 2021 is on the cards.”