USD/TRY eyes to regain $12.00 even as Turks shifted 10 billion lira to new accounts

• USD/TRY consolidates recent losses around six-week low, sidelined of late.
• Turkish FinMin Nebati conveyed success of ‘dollarization’ measures.
• US Treasury yields, firmer US data also back corrective pullback amid quiet session.
• Bulls remain hopeful considering CBRT’s refrain from rate hikes despite heavy inflation.

USD/TRY holds onto the previous day’s bounce-off mid-November lows around $11.55 during early Friday morning in Europe.

The Turkish lira pair justifies the market’s consolidation amid lackluster Asian session and ultra-thin volumes due to the holiday mood. In doing so, the USD/TRY fails to portray optimism over the Turkey government actions cheered by Finance Minister (FinMin) Nureddin Nebati.

“Turks transferred 10 billion lira ($889 million) worth of forex deposits into a new instrument the government introduced this week that covers any FX depreciation losses,” said Turkish FinMin Nebati on Thursday per Reuters.

Nebati also praised the government’s plan to intervene through the central bank or Treasury on broadcaster NTV while adding, “Is Turkey an unskillful country that watches the developments by itself and doesn't use all the instruments at its disposal in a positive way? It uses all the instruments."

It should, however, be noted that the dollarization plan has led to the exhaustion of the Turkish central bank reserves, which in turn could lead the future greenback demand. Additionally, the latest words from a Fed policymaker, namely Christopher Waller, were hawkish and signaled rate hikes in early 2022, which in turn challenge the USD/TRY pair’s further downside considering the latest upbeat US data and tapering.

For the day, an off in multiple western markets and a light calendar could restrict the pair moves.

Technical analysis

A convergence of 100-DMA and an ascending support line from early September, near $10.10, becomes the key level to reject the recovery hopes.