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USD/TRY hits record high as uptrend persists​​​​​

Turkish lira looks set for further weakness as we head towards the latest central bank meeting.

Lira suffers as the central bank continues to favour growth over a strong currency

The Turkish lira has been one of the biggest under-performers in the FX realm this year, with attempts to stabilize the economy after a major coronavirus-led contraction sparked record lows against the dollar.

This week will see the Turkish central bank return to the fold, with the latest monetary policy announcement coming on Thursday.

However, while the lira continues to plummet, we are unlikely to see the bank step in to arrest that decline. After all, a weaker lira is positive for the international competitiveness of domestic firms.

With real rates in Turkey well into negative territory, the question is whether we will see action taken in response to the double digit inflation rate that has persisted despite expectations of weaker prices. While the headline rate may not raised, there are calls for the one-week repo rate or late-liquidity window to be hiked.

Nevertheless, the lira remains stuck in a rut, with USD/TRY providing a consistent uptrend. With that in mind, long positions are favoured unless price declines below the ₺7.5388 swing low.

Given that this would also necessitate a trendline break, it is unlikely we will see such a move take shape. Instead, the uptrend looks likely to continue as we head into the latest monetary policy decision.

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