USD/TRY slumps to three-week low under 16.50 as Turkiye restricts lending to companies

• USD/TRY drops the most in 2022 as Turkish government takes step to curb lira selling.
• Policymakers restricted lending to companies with more than $1 million in foreign currency cash.
• US dollar pullback adds strength to the pair’s bearish performance.
• Comments from Turkish President Erdogan, US data eyed for fresh impulse.

USD/TRY slumps more than 3.0% as bears attack 16.00 heading into Monday’s European session. The Turkish lira (TRY) pair’s latest weakness could be linked to Friday’s Turkish moves to defend the struggling currency, as well as the US dollar’s recent weakness.

“The Turkish lira rallied as much as 6% against the dollar on Monday after Turkiye moved to restrict lira lending to many companies with more than $1 million in foreign currency cash in the latest step to reverse a slide in the currency,” said Reuters.

The news also adds, “After most local markets had closed for the week on Friday, the BDDK banking watchdog said if companies had more than 15 million lira ($908,000) of forex cash assets, and they exceed 10% of total assets or annual revenues, they will not be allowed to receive new lira loans.”

It’s worth noting that the high inflation and the Turkish central bank’s refrain from interest rate increases propelled the USD/TRY so far in 2022.

On the other hand, the US Dollar Index (DXY) remains pressured around the intraday low of 103.95 as markets struggle for clear directions. Market sentiment remains sluggish amid the fears of faster rate hikes and US economic slowdown, not to forget geopolitical concerns surrounding China and Russia. It should, however, be noted that the hopes of overcoming the tough time, as well as cautious optimism ahead of this week’s key debate among the policymakers of the European Central Bank (ECB), Fed and the Bank of England (BOE), seem to favor the mood.

Against this backdrop, the S&P 500 Futures remain firmer around 3,920, up 0.20% intraday by the press time, whereas the US 10-year Treasury yields rise three basis points (bps) to around 3.16% after posting the first weekly loss in four.

Moving on, Turkish President Recep Tayyip Erdoğan is up for meeting the policymakers during the day and will hold a press conference, making it the key event of the day for the USD/TRY traders to watch. Following that, US Durable Goods Orders for May, expected at 0.1% versus 0.5% prior, will be important to watch for fresh clues.

Technical analysis

USD/TRY’s downside break of a seven-week-old ascending support line, now resistance around 16.87, directs the bears towards the 50-DMA support near 16.00.