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  • TRY depreciates further to the 5.96 region vs. USD.
  • Spot leaps to yearly highs on steady CBRT.
  • CBRT removed pledge for further tightening if needed.

The selling pressure around the Turkish Lira is gathering further traction today and pushes USD/TRY to fresh 2019 highs just beyond the 5.9600 handle.

USD/TRY stronger after CBRT

TRY losses further momentum today after the Turkish central bank (CBRT) removed from the statement its pledge for further tightening of monetary conditions if needed.

In addition, and matching the broad consensus, the CBRT left unchanged the One-Week Repo Rate at 24.00% and the Late Liquidity Window Rate at 24.00%.

The central bank noted that the economic activity keeps running at a slow pace, while it expects the current account to maintain its improving note. The CBRT also noted that risks to price stability remain well and sound stemming from higher import prices, food prices and rising inflation expectations.

Still in Turkey, news agency Bloomberg said the country’s sovereign wealth fund, in an effort to keep the flow of credit alive and boost growth, has injected $3.7 billion to five state-owned banks.

In the meantime, spot is up for the sixth session in a row so far today, also posting gains in 11 out of the last 12 weeks following yearly lows in late January (5.1594 on January 31).

What to look for around TRY

The outlook on the Turkish Lira should be under scrutiny in the upcoming months. While the broader sentiment around the EM FX space is expected to influence on TRY, domestic drivers would likely prevail when determining its price action. Among these factors is the ongoing uncertainty around the possibility of a rerun of the mayoral elections in Istanbul, threats of US sanctions over the purchase of a Russian missile defence system and the progress in the implementation of the recently announced structural reforms, conditio sine qua non for the start of a sustainable economic recovery and a return of the confidence in both the currency and the country. In addition, TRY could see some acceleration of the selling impetus after the CBRT dropped its pledge to tighten further the monetary policy conditions in case of need.

USD/TRY key levels

At the moment the pair is gaining 1.35% at 5.9454 and faces the next up barrier at 5.9628 (2019 high Apr.25) seconded by 6.2277 (monthly high Oct.4 2018) and finally 6.5497 (high Sep.13 2018). On the other hand, a break below 5.8155 (200-hour SMA) would open the door for 5.7094 (low Apr.17) and then 5.5712 (200-day SMA).