Turkish Lira’s Spectacular Rebound

The Turkish lira plummeted in value in recent days and months. However, rebounded extraordinarily strongly yesterday as the Turkish government announced emergency measures to support the currency.

The USD/TRY currency pair peaked yesterday at a record high above 18. Afterward, it plummeted to as low as 11 just a few hours ago, a 38 percent drop from peak to trough. At the time of writing, the USD/TRY rate is 13.11. Because it is unclear how much impact the rescue package will have in the long run, there may be a short-term opportunity to buy on the dip. However, Forex brokers are imposing such high spreads (often more than 2%) that trading the Turkish lira may not be worth the risk.

The omicron coronavirus variant is rapidly spreading, particularly in the United States, the United Kingdom, and other European countries. The new variant’s morbidity is unknown, but it appears to be highly contagious. The caseload seems massive, with the UK recording nearly 100,000 new cases per day.

The spread is also broad in the Netherlands (which has recently implemented a complete lockdown), Denmark, and Norway. Markets are concerned about omicron’s potential to force more lockdowns and economic disruption. Yesterday, stock markets worldwide fell, as did risk assets such as commodity currencies. Although there has been a slight rebound in recent hours, markets remain vulnerable to risk-off sentiment.

Impact of Virus

The Reserve Bank of Australia published the most recent policy meeting minutes. This indicated that the RBA will likely end its QE program in February 2022. Participants remain optimistic that the omicron variant will not derail Australia’s ongoing economic recovery. Following the release, the Australian dollar rose slightly.

Last week saw a weekly increase in new confirmed coronavirus cases worldwide, with the highest number recorded in a single week since last August.

The number of confirmed new coronavirus cases worldwide is over 275.8 million, with a 1.95 percent case fatality rate.

Australia, Bolivia, Canada, Denmark, Ethiopia, Finland, France, Iceland, Italy, Kenya, South Korea, Malta, Monaco, Nigeria, Norway, Portugal, San Marino, Spain, Sweden, Vietnam, the United States, and the United Kingdom appear to be experiencing the most significant increase in new coronavirus infections.

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