USD/TRY climbs to fresh 2022 highs past 17.30

• USD/TRY advances to new peaks north of 17.00.
• The lira depreciates more than 30% so far this year.
• The CBRT meets later in the week to decide on rates.

The Turkish lira sinks to new lows vs. the greenback and pushes USD/TRY to new highs for the year around 17.3500 on Tuesday.

USD/TRY stronger ahead of CBRT event

The selling pressure around the Turkish currency picks up pace on Tuesday and motivates USD/TRY to add to gains recorded at the beginning of the week further north of the 17.00 mark.

The move higher in spot comes despite the offered stance in the greenback and follows usual concerns around the lira and the inability of the government and/or the Turkish central bank (CBRT) to tackle inflation and somehow restore some credibility to the beleaguered currency.

On the latter, the CBRT meets on Thursday amidst consensus for another “on hold” decision despite inflation ran at more than 70% from a year earlier in May.

Furthermore, the lira has depreciated more than 30% and remains the worst EM performer so far this year. It is worth recalling that the currency lost 44% vs. the US dollar in 2021.

What to look for around TRY

USD/TRY keeps the underlying upside bias well and sound and now surpasses the 17.00 mark, an area last traded back in December 2021.

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: Consumer Confidence (Wednesday) - CBRT interest rate decision (Thursday) – Capacity Utilization, Manufacturing Confidence (Friday).

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 0.16% at 17.3433 and faces the next up barrier at 17.3499 (2022 high June 21) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the flip side, a breach of 16.3136 (monthly low June 3) would aim to 16.1431 (low May 27) and finally 15.6684 (low May 23).