The USD/TRY exchange rate has recently shown signs of weakening, with the Turkish lira (TRY) currently trading at 90-day lows near 0.023513. This figure represents a decline of approximately 1.5% from the three-month average of 0.023867, indicating a stable 3.2% trading range between 0.023513 and 0.024270.
Analysts note that the US dollar (USD) has struggled against various currencies, including the TRY, primarily due to anticipated aggressive rate cuts by the Federal Reserve in 2026. Significant market sentiment is leaning toward multiple rate cuts, which could further diminish the USD's relative yield advantage and increase downward pressure on the currency. As mentioned, the USD has been drifting due to mixed economic data, with cooling manufacturing indicators and decelerating consumer spending contrasting against a resilient labor market. This mixed backdrop suggests that while the economy shows signs of slowing, immediate drastic effects on the USD may be curbed by strong employment figures.
Turning to Turkey, the Central Bank of the Republic of Turkey (CBRT) recently reduced its policy interest rate to 39.5%, indicating a slowdown in its easing cycle amid rising inflation concerns. The CBRT has confirmed its inflation target of 16% for the end of 2026 while acknowledging potential upward pressures on actual inflation. Such adjustments in Turkey’s monetary policy could impact the TRY’s position against the USD in the short term, especially if inflation continues to outpace the CBRT's expectations.
The combination of a dovish Fed and the CBRT's cautious approach to easing could lead to further volatility in the USD/TRY pair. The prevailing sentiment suggests that if global risk sentiment stabilizes and the TRY faces inflationary pressures, the USD could remain weak while maintaining a relatively stable level against the lira. Investors are advised to keep an eye on future economic data releases and central bank communications that could influence exchange rate movements.
