USD/TRY remains bid above 15.00, retreats from 2022 highs

• USD/TRY clinches new 2022 peaks near 15.40.
• Turkey 10y bond yields rise above 24.00%.
• Markets’ attention no shift to the CBRT event in late May.

The Turkish lira remains on the defensive and pushes USD/TRY to new YTD peaks in the vicinity of 15.40 on Wednesday.

USD/TRY in 5-month highs

USD/TRY posts gains for the fifth consecutive session on Wednesday and extends the recent breakout of the 15.00 barrier on the back of the persistent sell-off in the Turkish currency.

Indeed, the lira drops to levels last seen back in late December 2021, as the currency remains under heavy pressure following prospects of a longer-than-anticipated military conflict in Ukraine and its potential impact on energy prices.

In the meantime, investors continue to closely follow any indication of intervention by the Turkish central bank (CBRT) in the FX markets in order to prevent the lira to depreciate to unwelcomed levels.

The CBRT meets again on May 26 and market participants have already started to price in another “on hold” stance from the central bank, despite inflation rose to almost 70% in the year to April.

What to look for around TRY

The lira broke below the multi-week range bound theme vs. the greenback and lifted USD/TRY to the area beyond the 15.00 neighbourhood. So far, price action in the Turkish currency is expected to gyrate around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of abating, real interest rates remain entrenched in negative figures and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Unemployment Rate (Tuesday).

Eminent issues on the back boiler: FX intervention by the CBRT. 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. Structural reforms. Upcoming Presidential/Parliamentary elections.

USD/TRY key levels

So far, the pair is gaining 0.38% at 15.3059 and faces the next hurdle at 15.3746 (2022 high May 11) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a drop below 14.6836 (monthly low May 4) would expose 14.5458 (monthly low April 12) and finally 14.5136 (weekly low March 29).