USD/TRY rises to multi-session highs around 14.70

• USD/TRY adds to Monday’s gains near 14.70.
• The lira remains under pressure and looks to geopolitics.
• Turkey 10y bond yields rebound to the 26.00% region.

The Turkish lira depreciates further and lifts USD/TRY to new multi-day highs around 14.70 on Tuesday.

USD/TRY higher post-Turkey CPI, Ukraine

The lira extends the bearish note so far this week after inflation in Turkey ran at its fastest pace in the last 20 years, in March, as consumer prices rose 61.14% from a year earlier. The Core CPI rose 48.39 and Producer Prices increased nearly 115% vs. the same month of 2021.

Following the release of the March inflation figures, the real interest rates in Turkey now became the lowest in the world at just past 47%. It is worth mentioning that the CBRT’s easing cycle in 2021 coupled with negative effects of the coronavirus pandemic and lately by the war in Ukraine have all been factors impacting negatively on the Turkish currency.

What to look for around TRY

The lira keeps the range bound theme unchanged vs. the greenback, always in the area below the 15.00 neighbourhood for the time being. 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: End Year CPI Forecast (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. Earlier Presidential/Parliamentary elections?.

USD/TRY key levels

So far, the pair is gaining 0.26% at 14.7155 and faces the next hurdle at 14.9889 (2022 high March 11) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a drop below 14.5136 (weekly low March 29) would expose 14.0419 (55-day SMA) and finally 13.7063 (low February 28).