USD/TRY challenges lows around 3.8000

The Turkish Lira is sharply higher vs. the greenback at the beginning of the week, with USD/TRY dropping to lows in the 3.8000 neighbourhood.

USD/TRY deflates from all-time tops

TRY is posting daily gains for the first time after four consecutive pullbacks, recovering ground after Friday’s lows just above the 3.9100 handle.

Spot climbed to levels above 3.9100 the figure on Friday after agency Fitch lowered the country’s credit rating to BB+ (junk) with stable outlook, while agency Standard & Poor slashed Turkey’s outlook to negative. Both agencies cited domestic political and economic uncertainty and geopolitical risks as the main drivers behind the decision.

Ahead in the week, Trade Balance figures are due tomorrow, ahead of Manufacturing PMI and critical inflation figures on Friday. Recall that domestic consumer prices have risen more than expected in December, reverting three consecutive months with declining CPI.

The Turkish central bank (CBRT) has risen the Overnight Lending Rate by 75 bp at its last meeting - leaving unchanged the One-Week Repo Rate and the Overnight Borrowing Rate at 8.00% and 7.25%, respectively - although its efforts to curb the increasing TRY weakness seem insufficient for the time being.

USD/TRY key levels

At the moment the pair is losing 1.55% at 3.8101 facing the next support at 3.7555 (20-day sma) followed by 3.7349 (low Jan.24) and finally 3.7161 (low Jan.13). On the other hand, a surpass of 3.9107 (high Jan.27) would expose 3.9296 (high Jan.12) and finally 3.9423 (all-time high Jan.11).