USD/TRY remains bid and climbs to 2-week highs near 17.20

• USD/TRY extends further the breakout of the 17.00 level.
• The lira remains weak in line with the rest of the risk complex.
• Current Account and End Year CPI Forecast next on Friday.

Another day, another drop in the Turkish lira, and this time lifting USD/TRY further north of the recently broken 17.00 yardstick.

USD/TRY up on stronger dollar

USD/TRY advances for the sixth session in a row so far, gaining already 8% since the lows near the 16.00 neighbourhood on June 27 in response to the Turkish banking watchdog (BDDK) announcement of a ban on lira loans to certain companies with strong FX positions.

In the meantime, the strong upside momentum in the greenback continues to heavily weigh on the risk complex and the EM FX universe, putting TRY under extra selling pressure.

No releases on Thursday in Türkiye should leave all the attention to Friday’s publication of May’s Current Account and End Year CPI Forecast for the month of July.

It is worth recalling that markets in Türkiye will close earlier on Friday in observance of the Eid-al-Adha holiday.

What to look for around TRY

USD/TRY keeps heading north – and the lira continues to give away gains - after bottoming out in the 16.00 zone in late June, as investors appear to have already digested the latest announcement by the BDDK.

So far, the lira’s price action is expected to keep gyrating around the performance of energy prices, the broad risk appetite trends, the Fed’s rate path and the developments from the war in Ukraine.

In addition, the effects of this new measure aimed at supporting the de-dolarization of the economy will also have its say, at least in the very short term.

Extra risks facing the Turkish currency 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 Türkiye this week: Inflation Rate, Producer Prices (Monday) – Current Account, 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. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is gaining 0.32% at 17.2441 and faces the immediate target at 17.3759 (2022 high June 23) seconded by 18.2582 (all-time high December 20) and then 19.00 (round level). On the other hand, a breach of 16.0365 (monthly low June 27) would pave the way for a test of 15.6684 (low May 23) and finally 15.4281 (100-day SMA).