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The Turkish lira continued its remarkable collapse as concerns about the country’s inflation remained. The USD/TRY exchange rate sits at a record high of 28.14, much higher than where it started the year at 18.48. It has jumped by more than 173% from the lowest point in 2022.
CBRT interest rate decision ahead
The USD/TRY exchange rate will be in the spotlight on Thursday as the Central Bank of the Republic of Turkey (CBRT) decision.
Economists polled by Reuters believe that the CBRT will continue hiking interest rates. Precisely, they believe that the bank will hike rates from 30% to 35%. They also believe that the bank will hike the overnight borrowing and lending rates to 33% and 36%, respectively.
The bank has been hiking interest rates since June when it hiked interest rates from 8.50% to the current 30%. It has done that in a bid to slow the runaway inflation, which has remained stubbornly high for years.
The most recent data shows that the headline Consumer Price Index (CPI) rose by 61.5% in September. It had risen by 58.9% in September and analysts believe that rates will continue rising in the coming years. A poll by Reuters found that most analysts expect inflation to end the year at 69.3%.
Economists also expect the economy to have some modest growth this year. Precisely, they expect that the country will expand by 4% while the current account deficit will be 4.6% of the total GDP.
The Turkish lira faces an uphill path to recovery since many Turks have now moved to foreign currencies like the US dollar and the euro. Also, the ongoing tensions in the Middle East are not helping.
Israel is still battling Hamas and the situation could worsen if Israel launches a ground operation. On Wednesday, Erdogan continued criticising Israel and defending Hamas, who he clims were not terrorists.
An escalation of the crisis could push the prices of energy higher, which will lead to more inflation in the country.
USD/TRY technical analysis
USD/TRY chart by TradingView
The USD/TRY exchange rate has been in a strong bullish trend in the past few decades. It jumped to a high of 28.14 on Thursday, the highest point on record. As it rose, the pair remains above the key support at 27.37, the highest swing in September.
The USD/TRY pair has also remained above all moving averages, signaling that bulls are still in control. Therefore, the outlook for the USD to TRY exchange rate is bullish as buyers target the key psychological level at 30.
