Why Is The US Dollar Gaining Value?

Why is the US Dollar gaining value? Speaking to Reuters, an official explained two reasons behind the USD's rise.

The USD/TL exchange rate, which declined to 8.29 last week, went up to 8.67 on the first trading day of the new week. As markets looked for a reason, a bank's currency desk trader told Reuters: "Strong US data presents a scenario where the Fed may pull back support early. We see the depreciation of this effect in TL. However, the main reason for the depreciation in TL is the concern of early interest rate cuts. There is no inflation outlook in the markets that can cut interest rates. However, the worry that the CBRT will still try to cut interest rates is the main reason for the depreciation.” The banker continued: "For an inflation-oriented monetary policy, a scenario in which interest rate hikes and cuts will start in the next 3-4 months is required. However, we do not think that the CBRT will increase interest rates. These expectations create a spiral depreciation in TL. It is up to the CBRT to get out of these expectations. Pricing is also determined according to what is preferred.”

Market Awaits Decision of the CBRT

In his presentation of the inflation report, in which the year-end inflation forecast was raised to 14.1 percent, CBRT Governor Şahap Kavcıoğlu said that inflation could be volatile in the summer months, that this movement would be temporary and that inflation would decrease markedly in the last quarter of the year. Markets responded to these statements as a monetary policy response to the rise in inflation. According to the Reuters survey, it is thought that the CBRT will not be able to cut interest rates this week due to the rise in inflation. The median expectation in the survey was that interest rate cuts would be around 100 basis points in the fourth quarter. The USD rose against major currencies and hit a four-month high against the euro as traders positioned on expectations that the Federal Reserve could tighten monetary policy sooner.