- USD / TRY remains well offered above 8.00.
- Geopolitical and monetary concerns continue to weigh on the lira.
- Turkey’s economic confidence improved to 92.80 in October.
The fall of the lira remains unstoppable for another session and pushes the USD/TRY to new all-time highs above 8.30 on Wednesday.
USD / TRY looks at geopolitics
USD / TRY extends the rise along with the relentless depreciation of the Turkish lira, which has already lost around 28% so far this year.
Investors continue to sell the lira following the Turkish central bank’s decision last week to leave the one-week repurchase rate unchanged in the face of broad consensus favoring an increase of at least 150 basis points.
The further currency drop comes from the geopolitical side in response to mounting bets on US and EU sanctions against Ankara following the purchase of the Russian S-400 missile defense system and escalating verbal tensions with France.
That, plus Turkey’s continued involvement in the conflicts in the eastern Mediterranean and the Caucasus, have exacerbated the selling pressure around TRY.
In the domestic scenario, the prospects for higher inflation seem reinforced by the reluctance of the CBRT to further tighten its monetary policy (or at least in line with market expectations). The situation seems aggravated by the continued loss of foreign exchange reserves by state lenders to prevent the currency from weakening further. Meanwhile, a lethal cocktail for a balance of payments crisis continues to brew.
Turning to data in Turkey, economic sentiment rose to 92.8 for the current month.
Technical levels
At the moment, the pair is gaining 1.09% at 8.2727 and faces the next hurdle at 8.3158 (all-time high on Oct 28). On the downside, a drop below 7.7787 (Oct 22 low) would expose 7.6294 (Oct 1 monthly low) and finally 7.5082 (Sept 25 low).
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Credits: Forex Street
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