USD/TRY: Turkish lira slides after the mild CBRT rate decision

on Jun 17, 2021
  • The USD/TRY pair rose for the fourth straight day after the CBRT decision.
  • The central bank left interest rates unchanged for the third consecutive month.
  • The decision came after the Fed turned hawkish in its Wednesday meeting.

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The USD/TRY pair jumped on Thursday after the latest Fed and Turkish interest rate decisions. The pair rose to an intraday high of 8.6300, which was more than 4% above the lowest level this week.

Turksih lira
Turkish lira chart

CBRT interest rate decision

The CBRT concluded its two-day monetary policy meeting on Thursday. In it, the bank decided to leave interest rates unchanged at 19% where they have been in the past three months. It also left the overnight borrowing and lending rates at 17.50% and 20.50%, respectively. 

In the statement, Governor Sahap Kavcioglu said that the country’s economy was doing relatively well, supported by the ongoing rollout of the coronavirus vaccine. He also said that the country’s economy was recovering well, helped by the relatively strong external demand, which was offset by  weak domestic consumption. He said:

“The policy rate will continue to be determined at a level above inflation to maintain a strong disinflationary effect until strong indicators point to a permanent fall in inflation and the medium-term 5 percent target is reached.”

The decision came a few weeks after President Recep Erdogan asked the Federal Reserve to start lowering interest rates. He believes that low interest rates will help the country emerge from the pandemic at a relatively stronger pace.

The biggest driver for the USD/TRY is the overall strong US dollar after the latest Fed interest rate decision. The bank expects to start hiking interest rates in 2023. As such, analysts expect that the bank will start tapering its asset purchases in the near term.

USD/TRY technical analysis

USD/TRY technical chart

The daily chart shows that the USD/TRY has been in a strong upward trend in the past few months. This has seen the pair form an ascending channel that is shown in black. It is also substantially above the 25-day and 50-day exponential moving averages (EMA) while the MACD has formed a bearish divergence pattern. 

Therefore, the pair will likely keep rising as bulls target the year-to-date high of 8.8147. However, a drop below the support at 8.500 will invalidate the bullish view.