FX Daily: ‘Unhealthy’ price action

FX Daily: ‘Unhealthy’ price action

The Central Bank of Turkey continues to intervene in FX markets and sell USD/TRY, citing 'unhealthy price formations in exchange rates'. In Brazil, the local central bank is also selling dollars, but here to offset some of the large dividend outflows from the BRL normally seen at this time of the year. A hawkish Fed this week should see the dollar stay bid. FX markets are generally quiet as they await the major event risk of the Fed, where the new FOMC statement and projections (including Dot Plots) are released at 20CET tomorrow. Today's US focus will be on whether the US debt limit gets raised and also whether Joe Biden's Build Back Better stimulus package can make any progress in the Senate. We would expect DXY to continue trading towards the upper end of its 95. 50-97. 00 range ahead of the Fed. Away from the dollar, the focus remains on the Turkish Lira, where the Central Bank of Turkey tells us it continues to employ direct intervention due to 'unhealthy price formation of exchange rates'. It has confirmed four bouts of direct FX intervention since the start of December, when USD/TRY has been trading above 14. Given that