USD/TRY bounces off multi-day lows near 14.50

• USD/TRY regains downside traction and revisits 14.50.
• The selling bias in the dollar helps the EM FX space.
• The CBRT is expected to hold rates later this week.

The Turkish lira appreciates further and drags USD/TRY to new 4-day lows in the 14.50 region on turnaround Tuesday.

USD/TRY looks to risk trends, geopolitics

USD/TRY retreats for the third consecutive session so far on Tuesday against the backdrop of the renewed and persistent offered stance in the US dollar, while the risk complex looks bolstered by hopes of a diplomatic solution to the war in Ukraine.

In addition, another strong decline in crude oil prices means to bring extra respite to the economic outlook for Turkey along with somewhat diminishing geopolitical concerns.

Moving forward, consensus around the next meeting by the Turkish central bank (CBRT) leans towards a steady hand, with no changes to the One-Week Repo Rate, currently at 14.00%.

On the docket, Turkey’s Budget surplus more than doubled in February to TL69.74B (from TL30.00B).

What to look for around TRY

The lira regained some poise in past sessions, leaving the area of YTD lows vs. the US dollar around the 15.00 zone (March 11). In the very near term, price action in the Turkish currency is expected to gyrate around the performance of crude oil, the broad risk appetite trends, the FOMC event and the progress of the peace talks in the Russia-Ukraine front. Extra risks facing TRY also come from the domestic backyard, as inflation gives no signs of easing, real interest rates remain negative and the political pressure to keep the CBRT biased towards low interest rates remain omnipresent.

Key events in Turkey this week: Budget Balance (Tuesday) – CBRT Meeting (Thursday).

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. Structural reforms. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is retreating 0.76% at 14.6529 and a drop below 13.7143 (low Feb.25) would expose 13.5091 (low Feb.18) and finally 12.4317 (low Feb.11). On the other hand, the next up barrier lines up at 14.9889 (2022 high Mar.11) seconded by 18.2582 (all-time high Dec.20) and then 19.00 (round level).