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USD/TRY Rebounds After Surprise Rate Hike

turkish lira

USD/TRY is showing increased volatility after a surprise rate hike last week. The Turkish Lira had a strong rebound last week after plummeting to record lows against the greenback. The latest analysis reveals that the pair may stabilize soon after a major policy shift by the Turkish government.

After a 2.05% pullback last week, USDTRY is gaining strength once again. On Monday, dollar to lira exchange rate increased by 0.28%, suggesting that the bulls are still in control. The Turkish currency has been facing some serious headwinds for the past two years.

Turkish Lira Strengthens But There’s A Catch

In a surprise move, the Turkish central bank hiked the interest rates by 750 basis points against the market expectations of 200 bps. This depicted a major shift in the policy of a central bank that was previously skeptical of the high-interest rates. Consequently, the interest rates in the country facing soaring inflation have now reached 25%.

However, USD/TRY is once again on a roll as the dollar strength index continues to gain momentum. The hawkish policies of the US Federal Reserve are strengthening the greenback as investors expect more rate hikes this year.

USD/TRY Forecast

After a 750 basis points hike, USDTRY plummeted to its lowest level since June 26. However, the pair recovered as the DXY index extended its gains on Friday. Currently, the forex pair is trading 2.27% below last week’s high of 27.21, which is also the all-time high.

USD/TRY forecast will become very bullish if the pair reclaims last week highs. This would send the Lira to new lows against the US dollar. Such a move might also suggest that only aggressive rate hikes won’t be enough to stabilize Lira, and the country needs wider economic reform.

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