The USD to TRY exchange rate recently moved to 90-day highs near 41.97, reflecting a 1.9% increase above its 3-month average of 41.2. This movement has taken place within a stable range of 3.8%, fluctuating only between 40.42 and 41.97. Analysts attribute the strengthening of the US dollar to easing economic fears and a decrease in US-China trade tensions, fostering a positive sentiment around the currency.
Recent forecasts suggest that key market factors will continue to influence the USD's trajectory. The transition in Federal Reserve leadership is expected to play a significant role, particularly with Treasury Secretary Scott Bessent’s calls for a new Fed chair capable of assessing the organization’s broader responsibilities. Furthermore, the upcoming Consumer Price Index report expected in mid-August is projected to show a 0.3% increase in core prices, which could sway the Fed's interest rate decisions.
On the Turkish side, recent economic developments pose challenges. The termination of the foreign exchange-protected deposit scheme has raised concerns about the stability of the lira, which previously cost the country approximately $60 billion. Compounding issues, the Turkish economy is grappling with a sharp rise in inflation, recorded at 33.3% in September. Such inflationary pressures place additional strain on the central bank's ability to manage interest rates effectively.
However, there are promising indicators as well. The European Bank for Reconstruction and Development (EBRD) raised Turkey's GDP growth forecast, reflecting improved domestic conditions, even amidst highlighted risks like political instability. Additionally, a recently signed currency swap agreement with the UAE aims to bolster local currency liquidity, which may provide some respite to the lira.
Overall, the interplay between these factors suggests that the USD may continue to strengthen against the TRY in the coming weeks, depending on the developments in US economic indicators and Turkey's inflationary landscape. Market participants should be attentive to these trends as they could significantly impact international transaction costs.
