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USD/TRY Forecast – Aggressive Rate Hikes Fail To Stabilize Lira

USDTRY Turkish lira
USDTRY Turkish lira

USD/TRY is once again on the rise as the pair shrugs off the aggressive rate hikes. After a sharp decline in August, the pair is once again trading close to its all-time highs. The rising dollar strength (DXY) index is further generating headwinds for the dollar to the lira exchange rate.

This week, USDTRY has continued its steady rise. Since the start of the week, the pair has been up 0.46%. On Thursday, the forex pair rose for the fifth consecutive day, up 0.05% at press time. On a YTD basis, Turkish Lira has devalued 44.76% against the greenback.

The Future Of The Turkish Lira Remains Uncertain

Since the May 2023 elections, the Erdogan regime has taken a major U-turn in its monetary policy. The new economic team has shifted its focus toward conventional policies, ditching the previously preferred unorthodox approach. Due to this reason, the Turkish central bank has already hiked the interest rate from 8.5% in May to the current 25%.

The sharp rate rise was quite unexpected for the markets, resulting in a 5.53% drop in USD/TRY. This was the biggest single-day drop in the forex pair in years. However, Turkih Lira couldn’t hold the gains for longer and started showing weakness again. The conflicting approach from President Erdogan to keep the growth rate higher while hiking the rates is fueling the uncertainty in the markets.

USD/TRY Forecast Remains Bullish

Many investment banks are still skeptical of the recent strength in USDTRY. The pair is currently being managed by the new economic team. Due to this reason, many analysts still maintain their target of 30 for the exchange rate.

The USD/TRY forecast is pretty bullish right now as the uptrend of the forex pair remains intact. In the coming months, the pair may retest the diagonal resistance line, which is mentioned in black on the following chart.

In the meantime, you are also welcome to follow me on Twitter to keep track of my personal trades and the latest analysis on the Turkish Lira.