USD/TRY hit new record high in fresh bullish acceleration after the pair traded within a narrow range, slightly elevated higher consolidation, a part of a larger uptrend from Dec 2021 trough at 10.2017. In addition to overall weakness on slowing economic growth and record-high inflation, lira was hurt lately by surprise action from Turkey’s central bank, which cut its interest rate by another 100 basis points on the policy meeting last week.
Turkey’s central bank brought its benchmark interest rate to 12%, disappointing wide expectations for 50 basis points cut, reducing its borrowing cost by 1% for the second consecutive month after it cut its interest rate by 700 basis points during the past year.
The CBRT’s latest decision comes again in a hard collision with the fact that inflation in Turkey surpassed 80% and global central banks fight with much lower inflation rates by large-size rate hikes; Analysts see the latest policy decision as unsustainable and politically driven, blaming again Turkish President Erdogan for interfering the central bank’s Decisions, although he aims to boost production, exports, and investments by lower borrowing cost and turn current account deficit into a surplus, which is one of the possible actions in fighting high inflation, although conflicting with the prevailing trend of a massive increase of interest rates, adopted by several central banks.
USD/TRY Long (Buy)
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