USD/TRY extends the downside to 3-day lows near 8.1200

• USD/TRY adds to Wednesday’s losses near the 8.1200 level.
• CBRT official said there will be no premature rate cut.
• Speculations on an interest rate cut dominate the mood around TRY.

The Turkish lira keeps the renewed buying interest unchanged and drags USD/TRY to the area of multi-day lows near 8.1200 on Thursday.

USD/TRY met resistance near 8.50

USD/TRY sheds ground for the second consecutive session on Thursday, coming under some selling pressure after hitting new 2021 highs near 8.5000 earlier in the week.

The renewed buying interest around the Turkish currency appears to find oxygen in recent comments from CBRT officials. In fact, a senior CBRT official ruled out a premature rate cut earlier on Thursday.

In addition, Governor Kavcioglu reiterated to investors that the central bank will keep the current monetary policy conditions, adding that a tight policy is needed in order to fight the ongoing high inflation.

In the docket, Turkey’s manufacturing PMI improved to 52.60 in March (from 51.70).

So far, the lira depreciated nearly 14% since Erdogan sacked former CBRT Governor N.Agbal on March 19^th.

What to look for around TRY

The near-term outlook for the lira remains fragile to say the least. The new CBRT Governor S.Kavcioglu is expected to reverse (wipe out) the shift to a market friendly approach of the monetary policy that was successfully implemented by former Governor N.Agbal back in November 2020. President Erdogan’s appointment of Kavcioglu demonstrated once again whose hand is rocking the monetary cradle in Turkey and will most likely be the prelude of the return to unorthodox/looser measures of monetary policy in combination with rapidly rising bets of a balance of payments crisis and a drain of FX reserves. Against this backdrop, it will surprise nobody to see spot trading around 10.00 in the months to come.

Eminent issues on the back boiler: Potential US/EU sanctions against Ankara. Government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic.

USD/TRY key levels

At the moment the pair is retreating 1.20% at 8.1352 and a drop below 7.7772 (high Mar.9) would aim for 7.4785 (200-day SMA) and then 7.1856 (monthly low Mar.19). On the upside, the next up barrier is located at 8.4526 (2021 high Mar.30) seconded by 8.5777 (all-time high Nov.6 2020) and finally 9.0000 (round level).