USD/TRY soars to fresh record high, approaches 17.00 mark
|- USD/TRY blows past another record high, surges to the 17.00 neighbourhood on Friday.
- The recent CBRT rate cuts, soaring inflation continues to weigh heavily on Turkish lira.
The Turkish lira crashed to another record low on Friday and shot to the 16.85-90 region against its American counterpart during the first half of the European session.
The strong move up over the past two days or so comes after President Recep Tayyip Erdogan announced on Thursday to raise the minimum wage by 50% starting next year. Erdogan also said that the government would abolish income and stamp tax on the minimum wage. This was followed by a 100 bps rate cut by the Central Bank of the Republic of Turkey (CBRT) on Thursday.
Turkey's official inflation rate topped 21% in November – more than four times the target set by CBRT. The central bank, however, has not been given a free hand, instead is forced to adopt President's belief that high-interest rates cause inflation and delivered the fifth cut since September. With the latest leg down, the lira has lost over 50% of its value against the USD year to date.
Meanwhile, the latest leg of a sharp spike since the early European session could further be attributed to some technical factors on a sustained break through the 16.00 mark. That said, extremely overstretched technical indicators could hold back traders from placing fresh bets and cap the USD/TRY near the 17.00 round figure, at least for the time being.
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