US Dollar to Turkish Lira (USD/TRY) Exchange Rate Hits Fresh Monthly Low as Turkish Election Jitters Ease

Over the past month or so the US Dollar has declined versus its major peers as a result of disappointing domestic data results. The Federal Reserve previously stated that the Federal Open Monetary Policy Committee (FOMC) would make any rate revision subject to domestic data results. The run of weak ecostats, therefore, caused traders to pare bets as to the timing of a benchmark rate revision. Even the fractional advance amid speculation that the Fed would retire the data-centric policy was short-lived thanks to continued disappointing results from economic data publications.

Wednesday’s US Advance Retail Sales came in at 0.0% growth in April which suggests consumer confidence has taken a turn for the worse. This has caused most analysts to delay the Fed liftoff until late 2015, and some fear that a policy shift won’t come until 2016. ‘The sluggish spending and economic growth performance will continue to argue for a later start to liftoff, essentially ruling out a mid-year hike,’ said Millan Mulraine, deputy head of US research & strategy at TD Securities USA. ‘And if growth momentum does not rebound more meaningfully in the coming months, even the September meeting might be too soon for the Fed to gain the necessary confidence in the sustainability of the recovery to justify policy tightening.’
Thursday’s US labour market data will be of interest to those invested in the US Dollar. Should the data print poorly, the US asset is likely to extend its bearish run. Only a very positive result will buck the downtrend.
The US Dollar to Turkish Lira (USD/TRY) exchange rate is currently trending in the region of 2.6183.

For some time the Turkish Lira was trending bearishly versus its major peers as political uncertainty hindered investor confidence. The Lira is one of the worst performing emerging market currency thus far this year having dropped nearly 13% against the US Dollar. Concern that a new government win in June’s general election will see an extensive policy overhaul has weighed heavily on demand for the Turkish asset.

However, polls over the past few days suggest that the AK party is on course to win a majority and retain a single-party government. This has eased political uncertainty and the Lira rallied to a fresh monthly high versus the ‘Greenback’ (USD). Additional gains can be attributed to traders feeling that the Lira is critically undervalued irrespective of political uncertainties. ‘Investors are discounting election-related uncertainties and have decided that Turkish assets are too cheap,’ Istanbul Analytics' Atilla Yesilada said. ‘We suspect that the pre-election rally has started.’

Unless US economic data sees a significant turnaround, the US Dollar to Turkish Lira (USD/TRY) exchange rate is likely to continue trending lower for the remainder of Thursday’s European session.