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USD/TRY analysis as Goldman Sachs warns on lira carry trade

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June 2, 2025
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The Turkish lira has slipped against the US dollar as Goldman Sachs analysts warned about the best-performing carry trade. The USD/TRY exchange rate was trading at 39.25, up by 11% this year, and down from the year-to-date high of 39.85. 

Is the Turkish lira carry trade at risk?

Analysts at Goldman Sachs are warning that the world’s top carry trade is at risk of unwinding as the Turkish central bank allows the local currency to depreciate. In a recent note, the analyst said:

“It is plausible that the bank has decided not to focus on a rebuild of reserves on carry-driven foreign inflows. Hence, depreciating the lira might be partially a policy to keep that money out.”

The statement came as data showed that the central bank was allowing the Turkish lira to depreciate faster than usual.

It is doing this as recent survey data showed that many exporters complained that the currency was highly overvalued. An overvalued currency makes it difficult for exporters to sell their products abroad. 

Goldman Sachs analysts still believe that policymakers will change its tone at least in July, when it expects to start cutting interest rates in July. They wrote:

“We view the current FX policy as the central bank front-loading the depreciation required to avoid a meaningful real appreciation.”

The USD/TRY has been the best-performing carry trade pair this year. A carry trade is a situation where an investor borrows in a low-interest-rate country and then invests in a higher-yielding one. 

In this case, the Federal Reserve has left interest rates at 4.50% this year. At the same time, the CBRT delivered a big interest rate cut as the Turkish lira plunged following the arrest of a popular mayor. It hiked rates from 42.5% to 46%, bucking the trend since it had previously slashed rates three times.

One way of doing the USD/TRY carry trade is in the bond market, where the Turkish 10-year bond has jumped to 31.45% and the US yield stands at 4.40%. Therefore, borrowing US dollars to invest in Turkish bonds attracts at good return, which Goldman Sachs warns could be at risk.

The next important USD/TRY news will come out on Tuesday when Turkey will publish the latest inflation data. Economists expect the data to show that the headline consumer price index (CPI) slowed from 3% to 2%, and from 37.86% to 36.1%, respectively. The CBRT aims to lower inflation to 24% by the end of the year and 12% in 2026.

USD/TRY technical analysis

USDTRY chart | Source: TradingView

The weekly chart shows that the USD/TRY exchange rate has been in a strong uptrend in the past few months. It has remained above all moving averages, while the Relative Strength Index (RSI) and the Stochastic Oscillator have moved above the overbought level. 

Therefore, the USD to TRY pair will likely continue rising as bulls target the key resistance point at 41. A move below the 50-day moving average at 35.62 will invalidate the bullish view.

The post USD/TRY analysis as Goldman Sachs warns on lira carry trade appeared first on Invezz


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