USD/TRY lacks clear direction, remains muted around 13.6000

• USD/TRY remains directionless in the 13.6000 region on Friday.
• Cautiousness among investors is seen rising ahead of CBRT event.
• Turkey’s End Year CPI Forecast came at 29.75% in January.

USD/TRY alternates gains with losses around the 13.60/50 region at the end of the week.

USD/TRY cautious, looks to CBRT

USD/TRY remains broadly side-lined within the 13.00-14.00 range so far this year, with any bullish attempt likely to face strong resistance from intervention in the FX markets by the Turkish central bank.

On Thursday, President Erdogan defended the recently adopted scheme to protect lira deposits in an attempt to minimize the dollarization of its economy at the time when he stressed that “the swelling inflation is not in line with the realities of our country” at his testimony before the Turkish parliament.

In the docket, the End Year CPI Forecast came at 29.75% in January, up from the previous 23.85%.

What to look for around TRY

The pair moves within a 13.00-14.00 range so far this year. The higher-than-expected inflation figures released at the beginning of the year put the lira under extra pressure in combination with some cracks in the confidence among Turks regarding the government’s recently announced plan to promote the de-dollarization of the economy. In the meantime, 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 forecast to keep the domestic currency under intense pressure for the time being.

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira. 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. Potential assistance from the IMF in case another currency crisis re-emerges. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is down 0.07% at 13.5551 and a drop below 12.7523 (2022 low Jan.3) would pave the way for a test of 12.3367 (55-day SMA) and finally 10.2027 (monthly low Dec.23). 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).