
USD/TRY: Turkish lira collapses as CBRT actions backfire
- The USD/TRY exchange rate has surged to the highest level on record.
- It has surged by more than 50% from the lowest level in 2023.
- The pair’s surge is a sign that the actions by the CBRT are not working.
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The Turkish lira has crashed to the lowest level on record as the country’s economy falters and as the US dollar index (DXY) jumped. The USD/TRY exchange rate has soared to a record high of 28, about 50% above the lowest level this year. It has jumped by over 445% from the lowest level in the past five years.

USD/TRY chart
The Turkish lira sell-off gained steam after the country’s statistics agency published high consumer inflation data. According to the statistics agency, inflation has risen in the past three straight months, peaking at 61.53% in September. It has soared to the highest point since May this year.
The headline consumer price index rose by 4.75% on a MoM basis, lower than the median estimate of 4.88%. It was also a smaller increase than August’s 9.09% increase. Analysts believe that the plunging lira will likely lead to higher inflation and weaker lira weakness.
Another Turkish report by the Central Bank of the Republic of Turkey (CBRT) showed that the country’s current account deficit came in at over $0.62 billion in August, an improvement from the previous month’s $5.5 billion.
Turkish retail sales also crashed by 4.7% on a MoM basis after expanding by 3.0% in the previous month. This translated to a YoY increase of 17.2%, lower than the previous 31.2%.
Therefore, the performance of the USD/TRY is a reflection that the recent actions by the CBRT are not working. The bank has been hiking interest rates in the past few months as it seeks to stabilise the country’s inflation. It has hiked rates from the year-to-date low of 8.50% to 30%, the highest level in years.
Economists would prefer a more hawkish tone by the central bank. Also, analysts believe that the Turkish lira will stabilise when the Turkish government ends most of the current currency controls in the country.
The challenge for the lira is that many people in Turkey prefer holding the US dollar and other foreign currencies. As such, changing their mind will be difficult since they have seen their wealth evaporate in the past few decades.
The USD/TRY has also jumped because of the strong US dollar. The dollar index jumped to $107.5, the highest level this year. It has soared as investors predict that the Federal Reserve tightening rates as inflation remains at an elevated level.
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