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US Real Yields Send USD/TRY Packing to 7.50, Tactical Approach Warranted

TURKEY
  • * USD/TRY opens lower after peaking at 7.4990 during yesterday's session as an upside CPI print and rising US real yields drove the cross higher.
  • The greenback has abated a bit in the early part of the session, but markets will remain wary of further US yield curve moves higher as both the Fed & ECB have shown a willingness to let curves steepen, incurring multiple mini taper-tantrums, rather than one large one.
  • For now, the approach to EM FX must remain tactical, given risks to reflationary pressures on back-end yields.
  • Yesterday's CPI surprise will no doubt have escalated rate hike concerns at the march 18 meeting to support a wider TRY carry/real yield buffer against overshooting risks and re-anchor CPI expectations lower to bolster tentative signs of de-dollarisation.
  • Over the medium-term, the sell side remains positive on USD/TRY prospects below the 7.00 handle on a decisive tightening stance, but for now, increased volatility around US real yields will keep EMFX broadly on the backfoot and choppy with bouts of risk-off/on.
  • 7.50 proved sticky, seeing some fading interest after the 200dma was broken to the topside, but a close above would be bullish in the cross.
  • Intraday Sup1: 7.3935, Sup2: 7.3163, Res1: 7.4769, Res2: 7.50.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market News

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