The USD/TRY exchange rate continued to go back and forth around $13.45 to a Turkish Lira as forex traders eagerly wait for a major Turkey’s Central Bank, CBRT’s, decision as the week draws to an end.
The initial quotes dropped following comments by the Turkish President, Tayyip Erdogan, and a broad US dollar pullback. Note that the 500 bps cut in rates and big policy movements are set to confront the strong inflation to test USD/TRY investors ahead of the CBRT Interest Rate Decision.
The US Dollar Index stepped down from a weekly top to snap a 3-day after the US Treasury yields dipped following a multiple-day high. With that in mind, the US ten-year Treasury yields gained 2.2 bps to 1.85% recently while getting close to the highest points in about two years.
The President’s Speech
The latest rebound of the US Treasury yield may be associated with President Biden’s speech when he appreciated the Chairman of the Federal Reserve, Jerome Powell, for his role in trying to resolve the Sino-American trade dispute while indirectly giving the nod in favor of the reserve’s monetary policies. Events that also added to increase the bond coupon were issues marked in President Biden’s address as he stirred sensitive topics such as China, Russia, and the Build Back Better stimulus plan.
On the other hand, Turkish President Recep Tayyip Erdogan, addressed the central cabinet meeting on Wednesday as he pleaded with Turks and Turkish companies to change foreign currencies in their disposal to the country’s lira as the central bank is seeking ways to improve the currency’s viability and increase demand for it, according to Reuters.
The President was reported to have said that the volatility in the financial markets as a result of trade imbalance and unequal demand for foreign exchange will no longer be the case. This he said after the lira had dipped in value by as much as 44% against the US dollar.
Facing the Future
Forging ahead, Turkey’s Central Bank, CBRT’s responses are important for the USD/TRY investors as the country’s economy battles with high inflation records and the President still urges for further interest rate cuts.
Considering the above, analysts say that last month’s financial statements suggest that Turkey’s policymakers will halt the support cycle and study the effects on the economy for some months.
In all, the current USD/TRY rates diminish the recoveries gained last month, but a break of $13.85 is going to be a high bullish call.