Lira slumps further as crude oil nears $122

The pressure continues to mount on Turkish lira. President Tayyip Erdoğan has once again vowed to continue slashing interest rates despite annual inflation running at more than 70% amid soaring energy and food prices. With the Fed – and soon the ECB – hiking interest rates, this is further exacerbating the problem. Higher yields with much lower risk of default for those currencies means investors are happy to pile into the dollars and euros instead of lower-yielding currencies like the Japanese yen and much-higher-risk currencies like the Turkish lira. The result is that at 17.15, the USD/TRY is just shy of the intraday record of around 18.41 hit on 20th December. But it has now climbed above the record closing level that was hit that day. Is the USD/TRY heading for 20.00 next?

This morning saw the USD/TRY jump another 2.3% to above 17.15, extending its weekly gain to 4.5%. This was the third day of consecutive gains for this pair, as the lira sold off across the board. On Monday, Erdogan said Turkey will continue to cut interest rates further instead of hiking them in the face of high living costs. "This government will not increase interest rates. On the contrary we will continue lowering the rates," he added. He is urging people to take advantage of low-rate loans and invest in the economy, instead of holding dollars and euros.

Investors are also concerned that rising oil prices will just add to Turkey’s inflation misery. Brent oil climbed above $121.50 on concerns over tight supplies. Demand concerns have eased with China gradually re-opening its economy after spikes in Covid cases earlier in the year. What’s more, we are heading towards peak driving season in the US, which should mean higher demand for gasoline. The fact that oil prices have refused to go lower despite China’s lockdowns, economic slowdown in many parts of the world, OPEC ramping up output, and the big releases of strategic petroleum reserves in the US, China and elsewhere is remarkable. Rising oil prices are especially bad for consumer nations like Turkey, India, Japan and South Korea.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.