USDTRY is the ticker symbol for the US dollar to Turkish lira exchange rate in the forex markets. USDTRY is an exotic currency pair because one of its constituent currencies is that of an emerging nation, Turkey. Exotic currency pairs typically feature low trading volumes, overall illiquidity, and they are traded with relatively higher spreads than major currency pairs.
In the USDTRY Forex rate, the USD is the base currency, while the TRY is the quote currency. As such, the price of USDTRY at any given time represents the amount of Turkish Lira it would take to exchange for one unit of the USD (1 USD TRY).
History of USDTRY
The USD to TRY pair combines two-storied currencies that have had exciting journeys. The US dollar is the official currency of the United States. It was introduced in 1792 following the passage of the Coinage Act in the US Congress. The USD has risen to become the most powerful currency globally as of March 2022. It is the most used currency globally (both in reserve and circulation) and completely dominates global trade and finance. The USD overtook the British pound as the de-facto “world reserve currency” in the 1920s and cemented its status after the collapse of the Bretton Woods System. The US dollar is supported by the robust economy of the United States of America. The US has a highly advanced mixed-capitalist economy driven by high productivity. It is the largest in the world by nominal GDP and is supported by diverse industries such as Technology, Healthcare, Manufacturing, Energy, Finance, and Real Estate. Additionally, New York is a major financial centre, and it houses the largest and most active stock market exchanges in the world: NYSE and Nasdaq. In the forex markets, the USD is the most traded currency globally, accounting for over 80% of daily trading volumes.
Although not as powerful as the USD, the TRY has had a long and stormy history. The Turkish Lira is the official currency of the Republic of Turkey and Northern Cyprus. The TRY is the 19th most traded currency in the forex markets. It was introduced in 1844 as the Ottoman Lira. The formation of the Republic of Turkey in 1923 saw the currency name changed to the Turkish Lira. In its early years, the TRY was largely stable as the country maintained pegs to different currencies such as the USD dollar, the British pound, and the French franc. However, Turkey experienced chronic inflation between the late 1970s and the turn of the millennium. The TRY became so degraded that it was the least valuable currency in the world at one point. In 2007, the country redenominated the Turkish New Lira, with the new TRY worth 1,000,000 units of the old currency. Turkey is classified as a newly industrialized nation. It has a highly developed economy supported by agriculture, textiles, and the manufacturing of motor vehicles, consumer electronics, and transport equipment.
USDTRY Historical Price Performance
The USD/TRY has primarily been on an uptrend since it started trading post-2005. In the early years, USDTRY traded around 1.20, but it crossed the 2.00 barrier in mid-2013 and maintained a steady upward trajectory. In 2021, it crossed above the psychological 10.00 area. The pair has continued to edge high and currently trade just below 15.00.
Major Bodies Influencing the USDTRY – USD to TRY Trading
Here are some factors to look out for when engaging in USD/TRY trading:
The Federal Reserve is the central banking system of the United States of America. It issues and manages the USD and is tasked with ensuring the stability of the US financial and economic system. The bank releases interest rates and accompanying rate statements eight times a year. These are high-impact events for the US dollar. The Fed is the most powerful central bank globally, and its direct interventions in the market can have a huge impact on the forex markets.
The Central Bank of the Republic of Turkey (CBRT)
The CBRT is the central bank of Turkey. It is tasked with maintaining price and financial stability and ensuring an effective exchange rate regime. The CBRT has regularly intervened in the markets, especially after 2002 when it adopted an inflation-targeting policy regime. The Lira tends to strengthen in value, whereas rate hikes can pressure the TRY lower.
The Grand National Assembly of Turkey
Turkey is a highly politicized nation. This has made the Grand National Assembly of Turkey (the country’s Parliament) one of the most impactful bodies for the TRY. Notably, it is a law passed in 2003 by Parliament that paved the way for the redenomination of the currency in 2005. Furthermore, it is expansionist political policies that have pressured the TRY lower in recent years. Parliament has also, in recent times, passed laws on the allocation of central bank reserves. The actions of the Turkish Parliament can have a significant influence on the value of the TRY.
Understanding correlations can help spot rare trade opportunities and avoid increasing risk exposure in the markets. USDTRY tends to be positively correlated with pairs such as the GBPTRY, EURTRY, XAUJPY, and AUDCHF. The pair also tends to negatively correlate with the GBPAUD, GBPNZD, EURZAR, GBPUSD.
** Disclaimer –While due research has been undertaken to compile the above content, it remains an informational and educational piece only. None of the content provided constitutes any form of investment advice.