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  • USD/TRY trades on the defensive near 7.3200 on Monday.
  • Dollar weakness, risk-on favour the EM FX space.
  • Turkey’s CPI rose 1.25% MoM, 14.6% YoY in December.

The Turkish lira starts the year on a positive note vs. the greenback and drags USD/TRY to fresh lows in the 7.3200 region, where some support appears to have emerged so far.

USD/TRY weaker on USD sell-off

USD/TRY trades with a downside bias at the beginning of the new year amidst the broad-based selling mood hitting the US dollar and persistent inflows into the EM FX space and the rest of the risk galaxy.

The pair is navigating its fourth consecutive week with losses so far, as the lira remains well supported by the recent turn to a more orthodox monetary policy stance from the Turkish central bank (CBRT). In addition, the (now) more market friendly approach from the Erdogan’s administration has been also lending extra support to the currency and restored some credibility to both Turkey and the central bank.

Earlier in the session, inflation figures in Turkey showed consumer prices tracked by the CPI rose at an annualized 14.6% in December (from 14.03%) and 1.25% (from 2.30%). In addition, the Manufacturing PMI remained (just) within the expansion territory at 50.8 (from 51.4) and Producer Prices rose 25.15% YoY and 2.36% inter-month.

USD/TRY key levels

At the moment the pair is losing 0.44% at 7.3762 and a drop below 7.3034 (monthly low Dec.30) would expose 7.3016 (200-day SMA) and then 7.2019 (low Aug.21). On the flip side, the next resistance emerges at 7.7233 (100-day SMA) followed by 7.8531 (55-day SMA) and finally 8.0250 (monthly high Dec.11).