Turkish Lira Rallies As CBRT Tightens

Turkish lira (TRY) gains as the Turkish Central Bank (CBRT) announces lifts the cost of borrowing liquidity from it.

The USD/TRY has fallen over 200 pips in the last hour after the CBRT increased the late liquidity window by 75 basis points (bp) to 11.75% late yesterday and just announced it would flow through to higher funding costs this morning.

14:03 (TR) Turkey Central Bank: Targets to increase avg funding cost by 40- 50bps – Decision to raise late liquidity window lending rate was meant to strengthen monetary tightening – Source TradeTheNews.com

The TRY has enjoyed a stellar performance since the no new news is good news of a couple of days ago. Rallying from 3.7600 to 3.6000 this morning, an impressive 4.2% in three days. The latest headline will add more fuel to the fire as yield-hungry investors look with glee at a yield curve that boasts rates over around 11% implied from 1 month to 5 years. Even the 10-year government bonds are still yielding just over 11% as of the close of trading yesterday.

The tightening is part of the process of holding up the currency as Turkey’s current account, and debt dynamics (it has a lot of USD denominated debt) means it is one of the most exposed countries to rising U.S. yields. The no surprises Fed did it a big favour on Wednesday night, and the short-term charts imply this can continue as the carry traders pile back in.

USD/TRY Short-term/tactical

Looking at the hourly chart USD/TRY has support at 3.6000 with a break possibly triggering another round of stop loss selling.

Resistance is solid in the 3.6300 area and then just above 3.6700.

USD/TRY Chart

USDTRY Hourly

USD/TRY Longer-term

The daily chart also reveals some crucial support levels that are coming into view. At 3.5550 are we have a double bottom and the 200-day moving average. This is followed by 3.5000, where we have a series of daily lows from December.

USD/TRY Daily Chart

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