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  • USD/TRY goes on another dash as the Lira slips over unsolved tensions.
  • US tariffs on Turkey threaten to further destabilize the Turkish economy, exposing broader financial markets to possible debt contagion.

The USD/TRY saw the Lira make another run for recent highs, peaking at 5.6782 as fears of contagion from spoiling Turkish banking burdens runs foul with the US’ recent ramping-up of tariffs on Turkey in an effort to further squeeze Turkey’s already-beleaguered economy over a spat regarding an imprisoned religious official.

The Turkish Lira plummeted to an all-time low against the US Dollar of 7.1210 as Turkey’s weakened economy and fragile banking system revealed a much higher risk of contagion to broader global markets than initially expected, posing an especially big risk to other emerging market economies in the European and Asian world regions, as well as exposure risks for some of Europe’s largest banking sectors including France, Spain, and Italy.

US President Trump has been trying to force Turkey’s Erdogan to play along over the imprisoned Pastor Brunson, along with several other US citizens within Turkey,   but Turkey has reciprocated the US’ hard-line rhetoric, taking a cue from President Trump’s own playbook and lashing out over social media.

USD/TRY levels to watch

As unease over US-Turkey relations and contagion risks from Turkey both remain unclear, market tensions have been quick to reverse risk flows, and despite easing back from a peak of 7.1210 early this week to settle near 6.2640, the USD/TRY is back on the offensive, peaking at 6.5780 before taking a step back just beneath 6.5000, but the pair remains in a bullish stance as the TRY struggles to retain value.