USD/TL Exchange Rate Started the Week with an Increase

USD/TL exchange rate started the week with an increase. The USD/TL exchange rate has risen above the 9.80 level.

The USD/TL rate increased by more than 1 percent in the first transactions in Asian markets. The exchange rate fell to 9.70 after seeing 9.85 in shallow trades. Then, the US dollar rate, which started to rise again, recorded the level of 9.80 again. Turkey's credit default risk premium (CSD) stands at 468 basis points, while the 10-year bond yield stands at 20.31 percent. The Central Bank of the Republic of Turkey (CBRT) cut the policy rate from 18 percent to 16 percent last week, with a cut above the market expectations. After this decision, the USD/TL exchange rate started to move upwards rapidly.

Foreign Institutions Revised Their Forecasts

After the CBRT's interest rate decision, foreign institutions also revised their USD/TL expectations. Unicredit updated its year-end USD/TL forecast from 9.3 to 10.5 after the Central Bank of the Republic of Turkey lowered the policy rate to 16 percent, and said that they expect interest rates to decrease to 14 percent by the end of 2021. Unicredit, which also increased its inflation forecast for the end of 2021 from 18.5 percent to 19.6 percent, stated that they predicted that annual inflation would be around 20 percent in the first half of 2022, and then regress to 16.3 percent. HSBC, on the other hand, increased its year-end USD/TL forecast to 9.80 from 8.65, and its year-end forecast for 2022 to 10.70 from 8.80.