Turkish Lira Holds Ground Amid Inflation Slowdown

Turkish Lira Holds Ground Amid Inflation Slowdown

Key Takeaways

  1. Inflation Slows, Lira Stabilizes: The Turkish Lira has shown stability against the US dollar after reports revealed that Turkey’s inflation in October slowed down more than expected, with the consumer price index rising less than in September and below market forecasts.
  2. Forex Reserves Reach New Heights: Turkey’s foreign exchange reserves have reached the highest level in over two and a half years, with the central bank’s net international reserves also experiencing a significant increase, which may contribute to the currency’s stability.
  3. Upgraded Economic Growth Forecast: Fitch Ratings has raised its growth forecast for the Turkish economy, indicating a more optimistic outlook than previously stated. This could reflect stronger economic fundamentals in the country.
  4. Islamic Finance Sector Growth: There’s an anticipated surge in the size of Turkey’s Islamic finance sector, expected to exceed $100 billion in the next few years, driven by governmental support. This expansion could enhance the financial diversity and resilience of Turkey’s economy.
  5. Technical Outlook for TRY/USD: The USD/TRY trading pair remains stable, trading near record highs and within an ascending channel. The currency’s movement above key moving averages suggests a dominant buying presence and a general upward trend, with specific resistance and support levels identified for traders to watch.

During the Monday market opening, the Turkish Lira held its value against the American dollar, bolstered by the latest economic reports. The Turkish Central Bank’s recent data release showed an unanticipated deceleration in inflation for October. Instead of climbing, the monthly consumer price index saw a rise of just 3.43%, a dip from September’s 4.75% and below the forecasted 3.93%. Annually, inflation hit 61.36%, slightly under the anticipated 62.12% and the prior year’s 61.53% figure for the same month.

Turkey’s Forex Reserves Hit a New Peak

The Turkish Central Bank shared further positive news as its foreign currency reserves soared to a new high not seen in over two years, amassing $126.56 billion—a week-on-week uptick of roughly $435 million. Additionally, the bank’s net international reserves climbed by about $2.6 billion, reaching $25.15 billion.

Positive Economic Projections

Market players also digested Fitch‘s latest assessment, which upgraded its growth forecast for Turkey’s economy to 4.1%, nudging past the prior 3.9% prediction. Highlighting another area of potential growth, the report projected that Turkey’s Islamic finance sector could breach the $100 billion mark in the coming years, supported by governmental initiatives aimed at doubling the assets of Islamic banking by 2025.

Technical Analysis of TRY/USD

In technical terms, the USD/TRY currency pair exhibited steadiness in European trade, flirting with record highs near the 28.50 lira mark. The currency pair’s trajectory seemed to be locked in a bullish channel for the day’s session, as illustrated by the trading chart.

Should the lira appreciate, it faces upward resistance at 28.75 and 29.00 lira to the dollar. Conversely, a downturn would see it seeking support at approximately 28.10 and 27.90. With the price cruising above both the 50-day and 200-day moving averages on daily and four-hour charts, the buying sentiment appears strong, hinting at a persistent bullish trend. As long as the currency pair remains within the upward channel, further gains are anticipated. Investors are advised to monitor these levels closely while practicing sound capital management.