- USD/TRY extended its bullish bias following the recent Turkish inflation numbers.
- The headline CPI increased to 70.6%.
- Producer Price Index (PPI) surged to 144.61% last month.
USD/TRY sees its price nearing its ATH amidst surging Turkey inflation. Meanwhile, the Turkish lira dropped to 17.95 against the USD, which is briefly beneath the 18.38 all-time low. It has plunged by over 70% this year.
Turkish Lira Getting More Worthless
The USD-TRY exchange rate maintained uptrends following more disquieting economic data from Turkey. According to the nation’s statistic agency, Turkey’s headline CPI increased from June’s 78.62% to July’s 79.6%.
The surge was briefly lower than the 80.50% median estimate. On the positive side, the nation’s inflation dropped to 2.37% from 4.95% on an MoM (month-on-month) basis.
More data suggested that Turkey’s PPI (producer price index) climbed from 138.31% to July’s 144/61%. Similar to the CPI, the number dropped briefly to 5.17% from 6.77%. These figures suggest that the nation’s inflation is cooling despite being at its ATH.
Several factors contribute to the surged Turkish inflation. First and foremost, the lira’s weakness triggered the weakness as the county relies on imported energy. That means importers in Turkey are paying extra for their products.
Secondly, the CBRT (Central Bank of the Republic of Turkey) has retained a dovish tone despite the easing inflation. That’s contrary to what other emerging and developed central banks are acting. For instance, Banxico and the SARB (South Africa Reserve Bank) have introduced multiple rate hikes in 2022.
The worst thing is that CRBT has highlighted keeping a dovish stance in the upcoming months. Meanwhile, its plans to boost the Turkish lira have failed.
For instance, the bank has pledged to reimburse inflation-sensitive Turkish deposit holders. Moreover, it has introduced policies prohibiting loan access for companies with massive foreign reserves.
The daily chart indicated USD-TRY exchange rate maintained massive bullish biases over the last few months. The pair stayed beyond the 25 and 50 moving averages while nearing the 18.38 all-time highs. Meanwhile, the RSI (Relative Strength Index) hovered beyond the overbought zone of 70.
Thus, the USD/TRY pair might keep surging unless the CRBT interferes with rate hikes. A move past the 18.38 resistance will translate to slumps to 20 for lira.
Editorial credit: Furkan Cubuk / shutterstock.com