Bias: The outlook for USD/TRY is bullish-to-range-bound, as it is trading above the 90-day average and in the upper half of the 3-month range.
Key drivers:
• Rate gap: The Federal Reserve's current interest rate strategy remains supportive of the U.S. dollar, while the Central Bank of Turkey recently reduced its rate, widening the gap.
• Risk/commodities: Oil prices remain volatile; if they rise significantly, it could pressure the Turkish lira further down.
• One macro factor: Turkey's inflation rate recently increased, driven by food prices and supply disruptions, heightening economic uncertainty in the country.
Range: The USD/TRY is likely to drift within its recent 3-month range, possibly testing the upper extremities as factors push the exchange rate upwards.
What could change it:
• Upside risk: Strong U.S. economic data or dovish remarks from Fed officials could further strengthen the dollar.
• Downside risk: Any abrupt changes in Turkey’s monetary policy or worsening inflation could increase pressure on the lira, leading to depreciation against the dollar.
