USD/TRY advances to monthly highs near 13.70

• USD/TRY adds to Monday’s gains and approaches 13.70.
• Turkey’s Budget Balance showed a TL30.0B surplus.
• Markets’ attention remains on the CBRT meeting on Thursday.

The Turkish currency extends the pessimism seen at the beginning of the week and is now pushing USD/TRY to new monthly peaks near 13.70 on Tuesday.

USD/TRY in multi-day highs

USD/TRY rises to levels last seen back in mid-January around the 13.70 zone in the first half of the week despite the greenback trading on the defensive vs. the majority of its currency peers in response to the better mood in the risk complex.

Indeed, positive news citing some de-escalation of the Russia-Ukraine effervescence puts the buck under pressure and allows some breathing room for risk-associated assets on Tuesday.

In the domestic calendar, the Turkish Treasury reported a TL30.0B surplus in the Budget Balance in the first month of the year, reversing the acute TL145.74B deficit recorded in December.

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: Budget Balance (Tuesday) – CBRT interest rate decision (Thursday) – Consumer Confidence (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 0.42% at 13.6449 and a drop below 13.4317 (weekly low Feb.11) 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 13.6746 (weekly high Feb.14) seconded by 13.9319 (2022 high Jan.10) and then 18.2582 (all-time high Dec.20).