USD/TRY tumbles to lows near 5.67 post CBRT

• USD/TRY sinks to fresh lows on CBRT decision.
• The pair now risks testing the 55-day SMA at 5.6685.
• The CBRT cut the weekly repo rate by 325 bps.

The Turkish Lira is now picking up pace and drags USD/TRY to new multi-day lows near the 5.67 area.

USD/TRY weaker post-CBRT

The Lira appreciates around 1% vs. the buck on Thursday after the Turkish central bank (CBRT) cut the One-Week Repo Rate by 325 bps to 16.50% (from 19.75%). The rate cut, despite anticipated by market participants, was bigger than projected.

Additionally, the CBRT reduced the Overnight Borrowing Rate to 15.00% (from 18.25%) and the Overnight Lending Rate to 18.00% (from 21.25%).

The new CBRT Governor, M.Uysal, cut rates for the second time in a row after being appointed just prior to the previous meeting by President R.T.Erdogan. The central bank said that the economic activity keeps recovering despite the weaker global economic outlook, with exports and private consumption gradually improving. On the not-so-bright side, investment demand stays somewhat subdued.

The CBRT sees the current tight monetary conditions to keep helping in the ongoing disinflation process, which should eventually render in s stronger economic recovery.

USD/TRY key levels

At the moment the pair is losing 1.05% at 5.6844 and faces the next support at 5.6686 (55-day SMA) seconded by 5.6484 (monthly low Sep.5) and then 5.6034 (200-day SMA). On the upside, a surpass of 5.7913 (high Sep.11) would aim for 5.8475 (50% Fibo of the May-August drop) and finally 6.0027 (‘flash crash’ Aug.26).