USD/TRY finally reaches new all-time highs around 18.26

The Turkish lira depreciates to fresh record lows vs. the greenback and lifts USD/TRY to new all-time highs past 18.26 on Wednesday.

USD/TRY now looks to… 20?

USD/TRY gives away part of the initial advance amidst some renewed dollar weakness and the most likely presence of FX intervention by Ankara.

The pair, in the meantime, keeps well and sound the multi-week side-lined mood above the 18.00 region and against the backdrop of the utter absence of genuine buyers of the Turkish currency.

TRY, in the meantime, is expected to remain under scrutiny ahead of the release of the End Year CPI Forecast later in the week ahead of the key interest rate decision by the Turkish central bank (CBRT) on September 22.

In the domestic docket so far this week, the Unemployment Rate eased to 10.1% in July, while Industrial Production expanded 2.4% YoY in the same month and Retail Sales contracted 0.3% vs. the previous month.

What to look for around TRY

Finally, USD/TRY made up its mind and advanced to new all-time highs past the 18.26 level on Wednesday.

So far, price action around the Turkish lira is expected to keep gyrating around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine - the broad risk appetite trends and the Fed’s rate path in the next months.

Extra risks facing the Turkish currency also come from the domestic backyard, as inflation gives no signs of abating (despite rising less than forecast in July and August), real interest rates remain entrenched well in negative territory and the political pressure to keep the CBRT biased towards low interest rates remains omnipresent.

In addition, there seems to be no other immediate option to attract foreign currency other than via tourism revenue, in a context where official figures for the country’s FX reserves remain surrounded by increasing skepticism.

Key events in Türkiye this week: Budget Balance (Thursday) – End Year CPI Forecast (Friday).

Eminent issues on the back boiler: FX intervention by the CBRT. Progress of the government’s scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Structural reforms. Presidential/Parliamentary elections in June 23.

USD/TRY key levels

So far, the pair is losing 0.02% at 18.2409 and a breach of 17.8590 (weekly low August 17) would target 17.7919 (55-day SMA) and finally 17.7586 (monthly low August 9). On the upside, the next hurdle appears at 18.2623 (all-time high September 14) seconded by 19.00 (round level).