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  • USD/TRY remains well bid above the 8.00 mark.
  • Geopolitical, monetary concerns keep weighing on the lira.
  • Turkey’s Economic Confidence improved to 92.80 in October.

The lira’s rout remains unabated for yet another session and pushes USD/TRY to fresh all-time highs beyond 8.30 on Wednesday.

USD/TRY looks to geopolitics

USD/TRY extends the upside in tandem with the unremitting depreciation of the Turkish lira, which has already shed around 28% so far this year.

Investors continue to sell the lira following last week’s decision by the Turkish central bank to leave the One-Week Repo Rate unchanged vs. the broad consensus favouring at least 150bps hike.

Extra downside on the currency comes from the geopolitical side in response to rising bets on US and EU sanctions against Ankara following the purchase of the Russian S-400 missile defence system and escalating verbal tensions with France.

That, plus Turkey’s ongoing involvement in conflicts in the Eastern Mediterranean and the Caucasus have been exacerbating the selling pressure around TRY.

On the domestic scenario, the prospects of higher inflation appear reinforced by the reluctance of the CBRT to tighten its monetary policy further (or at least in line with market expectations). The situation looks aggravated by the continuous loss of FX reserves by state-owned lenders in order to prevent the currency to keep debilitating. A lethal cocktail for a balance of payments crisis keeps brewing in the meantime…

Data wise in Turkey, the Economic Sentiment edged higher to 92.8 for the current month.

USD/TRY key levels

At the moment the pair is gaining 1.09% at 8.2727 and faces the next hurdle at 8.3158 (all-time high Oct.28). On the downside, a drop below 7.7787 (low Oct.22) would expose 7.6294 (monthly low Oct.1) and finally 7.5082 (low Sep.25).