ONLINE FOREX BROKER
2021-12-02 • Updated
There has been extreme depreciation in TRY assets recently. There are several important reasons for this depreciation, and we will share them with you now. I will also provide information about whether the depreciation will continue or not.
Reasons for TRY Losses:
After the first quarter of 2021, the increase in demand for USD assets started to come to the fore. With the pandemic, we had periods of restrictions in many countries, and when these restrictions were over, it brought colossal inflation pressure. While inflation suppression increased investors' demand for USD assets, the FED began to give signs of tighter monetary policy. As a result, the US Dollar Index (DXY) rallied to 97.00 after a consolidation slightly below 90.00. This situation put the assets of developing countries under pressure.
TRY assets have been under pressure since the beginning of the year in Turkey, and the economy was struggling with high inflation and high interest rates. As of the third quarter of 2021, Turkish policymakers emphasized that high interest rates are the main reason for inflation. According to the economic rulers, a decrease in interest rates could also diminish inflation. President of the Republic of Turkey, Recep Tayyip Erdogan, stated that inflation is the cause, and the interest rate is the result. The statement was the first event that brought this problem to the center of market's attention. In this period, the Central Bank of Turkey began to make significant reductions in interest rates.
The Central Bank of Turkey (TCMB) determined an economic policy not found in current economic models and started decreasing interest rates despite rising inflation. For example, Bank lowered the policy interest rates from 19% to 15%. In this case, the lack of improvement in inflation and the decrease in interest rates caused investors to switch from TRY deposits to foreign currencies quickly. As a result, the USDTRY pair, traded around 8.5 TL, made a substantial rise to 13.5 TL due to these decisions.
The chart above shows Turkish Central Bank interest rates and the CPI and PPI rates for the Turkey region in 2021. In current economic models, a policy move that has not been encountered before caused significant losses in TRY assets.
Recent statements of the economic management in Turkey pointed to a change in economic policies. Instead of raising interest rates to control exchange rates, they tried to close the current account deficit with exports by liberalizing the exchange rates. Although this move is not included in the current economic models and literature, the Turkish economy management firmly defends its success.
There has been a definite upward trend in the USDTRY pair since 2011, and it failed to break this trend downwards. On the contrary, this channel has been broken upwards in the USDTRY pair, which indicates an extreme volume. In addition, the price reached the "overbought" zone according to oscillators such as RSI, CCI, and MACD. Therefore, if we do not see a significant improvement in inflation rates or tightening the Central Bank's monetary policies in the coming periods, the trend might become even more vertical.
On Wednesday, December 1, Turkey's Central Bank sold foreign currencies for the first time in seven years to stem the lira's decline against the U.S. dollar. TRY/USD reacted with the drop to 12.35 immediately but recovered right after. This event means that Turkey's government will try not to allow TRY to fall further against the USD.
From a technical point of view, we can see that rising wedge combined with divergences on RSI and MACD oscillators occurred on the chart. These patterns are bearish. In the nearest future, we assume that USD/TRY will get rejected out of 13.75, which is the 1.618 Fibonacci level. Moreover, we believe that Turkey's government will be able to push USD/TRY down to 12.6 in the coming months.
On Wednesday, the US dollar weakened in anticipation of the US CPI data, which could influence market exposure. A Bloomberg survey predicts a year-on-year read of 5.0% to the end of April. Market sentiment is affected by the US debt ceiling and issues with regional banks. While the major APAC equity indices are...
I know we've had quite an amazing run these past few month, with over 78% accuracy in our trade ideas and sentiments, and thousands of pips in profits monthly...
On Friday 10th February 2023, the Office for National Statistics published the figures for the Gross Domestic Product (GDP) as 0.1% which turned out greater than the initial forecast of -0.2%. As a result of the positive outlook of this report, we need to examine the short-term impact on GBP pairs from a technical point of view.
Let's dive into the world of gold. Currently, the price of gold, represented by XAUUSD, is stuck in indecision, hovering around the $1,975 mark. The market is anxiously awaiting two important factors: the release of the Federal Reserve's meeting minutes and the extension of the US debt ceiling.
Hey guys, this is the last full trading week in May, and many forward-looking individuals like myself are already preparing themselves to seize whatever opportunities June may have in store. On this note, I will review a few commodities that have satisfied my quest for swing-trading opportunities in the coming month. Follow me!
The Bank of England (BoE) has dramatically shifted its economic forecasts. They no longer expect a recession in the UK and have upgraded their growth projections. This year, the BoE predicts GDP growth of +0.25%, a significant improvement from previous expectations. Next year's forecast is even more optimistic, with a projected growth of 0.75%.
FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.
Your request is accepted.
A manager will call you shortly.
Next callback request for this phone number
will be available in
If you have an urgent issue please contact us via
Live chat
Internal error. Please try again later
Don’t waste your time – keep track of how NFP affects the US dollar and profit!
Beginner Forex book will guide you through the world of trading.
We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.
|
