USD/TRY Forecast Ahead of CBRT Decision, Saudi Cash Injection

The USD/TRY exchange rate remained in a consolidation ahead of the upcoming CBRT interest rate decision. It was trading at 18.61, where it has been in the past few months. This price is about 81% above the lowest level in December 2021 and is slightly below the all-time high of 18.80. 

CBRT interest rate decision

The USD to TRY rate has moved in a tight range in the past few days as concerns about the CBRT policies continued. Unlike other central banks, the CBRT has maintained a relatively dovish tone by slashing interest rates by 400 basis points so far. Those measures, together with the 600 basis points it slashed in 2021, have pushed inflation to over 85%. 

The CBRT will likely continue its rate-cutting campaign when it meets on Thursday. Analysts expect that the bank will slash interest rates by 50 basis points to 9%. Like in the past two meetings, there is a likelihood that the bank will slash interest rates by a bigger percentage than expected.

This view is in contrast to what other central banks are doing. In the United States, the Fed has hiked rates by 400 basis points this year. As a result, inflation has started moving in the right direction as it dropped to 7.7% in October.

The USD/TRY price reacted mildly to news that Saudi Arabia was considering depositing $5 billion into Turkey’s central bank. This move will help it to shore its foreign currency reserves and possibly boost the Turkish lira. The CBRT has spent over $18 billion this year to defend the lira.

It will also be an important deal since Turkey has already made such swap deals with countries like Qatar, China, UAE, and South Korea. Russia’s nuclear agency moved between $5-$10 billion to Turkey this year. Recent data shows that Turkey’s net foreign assets have jumped in the past few months.

USD/TRY forecast

The daily chart shows that the USD to TRY exchange rate has been in a consolidation phase in the past few months. In this period, it has been stuck at 18.7 and is trading at the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has moved to the neutral point at 50 while the Average True Range (ATR) has dropped.

Therefore, the USD/TRY price will likely remain in this range even if the CBRT makes another rate cut. A move above the resistance at 19 will point to more gains in the coming weeks.