It seems that Monday’s aren’t lucky enough for USD/TRY. Earlier, the currency pair had hit record lows last Monday. Moreover, today it lost around 3.42% as 1 USD was equal to 11.5 TRY at 8:28 a.m. ET. The currency has slumped around 35% compared to a year-ago figure. Though the dip is significant, it is still better than the 8% decline last week.
The pair was oscillating between gains and losses on Monday morning. Earlier, it succumbed to 11.00 few hours ago. Moreover, it lost significant value thereafter. Turkish President Tayyip Erdogan’s new economic laws have left the currency volatile, and it had fallen to around 18 per USD on Monday as a result of the same.
The 11.00 mark is still a sense of relief for investors in the holiday season. However, if we look at the technical chart for USD/TRY, the 100-Daily Moving Average (DMA) was at 10.11 per USD. This DMA indicates a ‘big no’ for bullish forex investors.
Last Tuesday, the Turkish Lira rebounded after a record fall on Monday. At around 6:00 am UTC, the Turkish currency traded at 12.77/USD. The USD/TRY pair has recovered since then, however, it has lost significant value thereafter.
After rallying nearly 50% last week, the Turkish Lira saw a huge correction because the investors considered the sustainability of the Erdogan government measures to bring up the currency. TRY has been dipping for more than five days now.
Unlike the usual Forex trends, the Turkish Lira swung wildly, falling 7% and rising by around 20% against the USD. This up-and-down swing has made the currency the world’s most volatile currency as of now.
A week ago, it hit record low in years. On Monday, the currency had rocketed with its biggest rally since 1983 after the President announced that the Government is planning measures to introduce a program to protect savings from Lira’s fluctuations. The convolutions in Lira have made the USD/TRY pair volatility to around 50%, leaving behind the levels during the currency crisis of 2018.
Reason for Fluctuating performance
President Tayyip Erdogan quoted the Islamic usury doctrine and stated that the measures would decrease the interest rate. Under Erdogan’s pressure, the central bank had cut key interest rates from 19 to 15 percent in September, causing the Turkish currency to plummet. It has further reduced interest rates from 15% to 14%.
Erdogan defended his policy on Sunday, saying that the currency volatility should be seen as an attack on the country’s economy. He also reassured that the inflation rates crossed the 20% mark would soon slide back under ten.
The Turkish Government is intended to mitigate the retail investors’ demands for dollars and bring an end to this currency crisis that has been troubling the country since September. The sustainability of the measures being undertaken and the reaction of the local investors are to be looked out for.
The investors’ concerns were visible from Turkey’s five-year credit default swap, which fell by 35 points, still hovering around the highest level of more than a year ago.
The volatility of the USDTRY pair has made investors compare its charts to Bitcoin, cryptocurrencies, and other meme stocks.