The USD/TRY exchange rate has recently shown considerable movement, reaching 90-day highs near 42.70, approximately 1.6% above its 3-month average of 42.03. This price stability has remained within a controlled range of 3.5%, fluctuating between 41.24 and 42.70.
Analysts note that the US dollar has been experiencing a subtle rebound following multimonth lows, influenced by changing investor sentiment towards the Federal Reserve's monetary policy. Expectations are growing for aggressive rate cuts in 2026, which have created a bearish outlook for the dollar, particularly as economic data reflects slowing growth yet resilient labor markers. Indeed, recent mixed signals from US manufacturing and consumer spending suggest potential declines for the USD in the immediate term.
Conversely, the Turkish lira's future is shaped by the Central Bank of the Republic of Turkey's (CBRT) recent monetary policy adjustments and inflationary pressures. In late October, the CBRT reduced its policy interest rate to 39.5%, indicating a pause in its easing cycle amid rising inflation risks. Despite a reaffirmed inflation target of 16% for 2026, the market anticipates that actual inflation could exceed these forecasts, adding concern to the lira's outlook.
Furthermore, Turkey's projected economic growth appears to be lagging behind government expectations, which could further hinder the lira. Political developments have also impacted the currency's stability, particularly following the recent arrest of prominent political figures causing market turmoil.
In summary, analysts suggest that a dovish Fed combined with the ongoing challenges surrounding Turkey's inflation and economic growth may create a volatile environment for the USD/TRY exchange rate. The upcoming economic data releases from the US and any significant shifts from the CBRT will be critical factors to monitor in the coming weeks.
