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  • USD/TRY adds to Thursday’s gains and approaches 8.00.
  • Further depreciation of the lira is likely in the next days/weeks.
  • The CBRT left the One-Week Repo Rate unchanged at 10.25%.

USD/TRY remains close to the area of all-time highs recorded on Thursday just below the 8.00 mark in the wake of the Turkish central bank’s decision to keep rates unchanged.

USD/TRY poised to extra upside near-term

USD/TRY keeps business at shouting distance from the key mark at 8.00 the figure amidst the relentless depreciation of the Turkish currency.

Indeed, the lira suffered extra selling pressure in past hours after the Turkish central bank (CBRT) disappointing market participants on Thursday by leaving the One-Week Repo Rate unchanged at 10.25% vs. forecasts ranging from a 150 bps-250 bps hike. The CBRT also left the Overnight Borrowing Rate and the Overnight Lending Rate at 8.75% and 11.75%, respectively.

The CBRT, instead, hiked the Late Liquidity Window (LLW) to 14.75% (from 13.25%). This is the borrowing facility the central bank uses to provide liquidity to domestic commercial lenders to meet their daily needs.

By doing this, the CBRT increased the corridor by 300 bps, rising further the cost of funding for the domestic financial system and thus supporting the lira (without directly hiking the One- Week Repo Rate).

The CBRT therefore lost a valuable opportunity to increase its (now almost non-existent) credibility among investors, particularly after last month’s 200 bps interest rate hike. The panorama looks even more sour for the currency when markets factor in a potential win by Joe Biden at the November elections and the subsequent announcement of sanctions against Ankara.

USD/TRY key levels

At the moment the pair is gaining 0.45% at 7.9610 and faces the next hurdle at 7.9791(all-time high Oct.22). On the downside, a drop below 7.7787 (monthly low Oct.22) would expose 7.5811 (55-day SMA) and finally 7.5082 (low Sep.25).