The USD/TRY exchange rate has recently shown volatility, with the US dollar currently trading near 90-day highs at approximately 42.50. This marks a 1.6% increase above its three-month average of 41.83, while the pair has remained within a stable range of 3.4% from 41.11 to 42.50. Analysts note that the US dollar has faced headwinds due to increasing expectations of a Federal Reserve rate cut, particularly as the American manufacturing sector displays signs of contraction.
Market sentiment surrounding the USD is influenced by several key factors, including a potential leadership change at the Federal Reserve and ongoing inflation expectations. The delay in interest rate hikes has caused the dollar to struggle for momentum, with recent data hinting at a possible deterioration in economic conditions. Forecasts suggest that if the Fed cuts rates in December, this might further suppress the dollar’s strength.
On the other hand, the Turkish lira is navigating significant inflationary pressures, compounded by recent policy adjustments by Turkey's central bank. The central bank reaffirmed a 2026 inflation target of 16%, although it raised the 2025 forecast range to 31-33%. This adjustment comes in the wake of a surge in annual inflation, which has risen unexpectedly to 33.29%. Consequently, while interest rates were cut recently, the central bank indicated readiness to tighten monetary policy if inflation deviates from its targets.
Political unrest and market volatility also serve as critical variables for the TRY, especially following recent protests that triggered a sharp depreciation of the lira. Such instability can create a challenging environment for the Turkish currency, limiting its ability to gain ground against the USD.
Overall, currency market analysts expect that the upcoming economic data from the US and Turkey, including inflation figures and central bank policy directions, will play pivotal roles in determining the future trajectory of the USD/TRY exchange rate.
