USD/TRY: Price action remains boring around 13.60

• USD/TRY extends further its consolidation theme near 13.60.
• Turkey 10y bond yields drop further and approach 21%.
• Turkey Unemployment Rate next on tap on Thursday.

USD/TRY navigates a narrow range around the usual 13.50/60 band on Wednesday.

USD/TRY stays range bound, looks to CBRT

USD/TRY remains side-lined around the familiar 13.50/60 region for yet another session on Wednesday, extending the muted price action that kicked in in mid-January.

In the meantime, the lira appears vigilant and follows the recent developments from a series of meetings between finmin N.Nebati with investors in London.

Nebati outlined Ankara’s plans for a stable currency amidst an economic programme based on low borrowing rates (?), prevent further dollarization of the economy and bring inflation to single digits by mid-2023.

The Turkish finmin also said the government is expected to announce a scheme to motivate households to convert holdings of gold into the domestic currency.

What to look for around TRY

The pair keeps its multi-week consolidative theme well in place, always within the 13.00-14.00 range. While skepticism keeps running high over the effectiveness of the ongoing scheme to promote the de-dollarization of the economy – thus supporting the inflows into the lira - the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are a sure recipe to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Unemployment Rate (Thursday) - End Year CPI Forecast, Current Account, Industrial Production, Retail Sales (Friday).

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant 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. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.26% at 13.5825 and a drop below 13.3494 (55-day SMA) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).