USD/TRY: Turkish lira sleeps and waits for CBRT to act

August 24, 2023 10:01 AM AEST | By Invezz

USD/TRY: Turkish lira sleeps and waits for CBRT to act — Image source: Invezz

CBRT decision ahead

The USD/TRY exchange rate is hovering near its all-time high as traders wait for the closely-watched decision by the CBRT. Most economists expect that the bank will decide to hike interest rates for the third straight month.

Precisely, they see the CBRT raising rates from 17.50% to 20% in a bid to support the floundering currency. Like in the past two meetings, the bank could decide to deliver a smaller rate hike than expected.

The CBRT decision comes at a time when the Turkish economy is facing substantial headwinds. Inflation has surged because of the falling currency. The most recent data showed that the headline consumer price index (CPI) jumped to almost 50% in June.

Further, the official unemployment rate remains substantially higher than other emerging market countries. It stands at almost 10% while analysts believe that the real number is much higher.

Turkey has also seen its foreign reserves decline in the past few months. Data by the central bank revealed that foreign reserves fell to $17 billion before the election.

On the positive side, Turkey’s current surplus jumped in July, helped by the resurgent tourism sector. The country is seeing more visitors who are attracted to its historic sites and the supportive lira rate.

The USD/TRY exchange rate will also react to the upcoming Jackson Hole summit meeting in the United States. In the past, the Turkish lira’s reaction to America’s economic data and Fed decisions has been a bit mild.

USD/TRY technical analysis

The 4H chart shows that the USD to TRY exchange rate has moved sideways in the past few weeks. In this period, the pair has remained between the key support and resistance levels at 26.80 and 27.30. The pair is slightly above the 50-period moving average while the Average True Range (ATR) has slumped.

Therefore, the outlook for the Turkish lira ahead of the CBRT decision is neutral unless the bank makes substantial changes to its policy. It will likely remain in this range for a while, with the key reference level being 27.30.

The post USD/TRY: Turkish lira sleeps and waits for CBRT to act appeared first on Invezz.

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