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  • USD/TRY regains composure following Wednesday’s pullback.
  • The lira fades gains following banking sector news on Wednesday.
  • Turkey’s manufacturing PMI eased a tad to 52.8 in September.

The Turkish lira resumes its offering bias and is pushes USD/TRY back to the 7.71/70 band at the time of writing.

USD/TRY looks to geopolitics

The lira is giving away part of Wednesday’s advance as market participants continue to gauge the geopolitical factor on the currency. Indeed, investors remain heavy sellers of TRY amidst rising fears that Turkey could get dragged into another conflict, this time in the Caucasus region and regarding clashes between Azeri and Armenian forces. It is worth recalling that Turkey supports Azerbaijan as opposed to Russia, who stands behind Armenia.

On Wednesday, TRY posted strong gains after the government cut taxes on lira deposits. Indeed, taxes charged on lira deposits exceeding 12 months, between 6 months and 12 months and up to 6 months were reduced to zero (from 10%), 3% (from 12%) and 5% (from 15%), respectively.

In the domestic calendar, the manufacturing PMI receded a tad to 52.8 in September from August’s 54.3, clinching the fourth consecutive reading above the key 50.0 threshold. Earlier in the week, the trade deficit widened to $6.28 billion during August.

Later in the session, key US data including the ISM Manufacturing and weekly Claims should keep the focus of attention on the buck.

In the meantime, the lira remains one of the worst performance currencies so far this year, losing nearly 25% vs. the greenback.

USD/TRY key levels

At the moment the pair is gaining 0.14% at 7.7075 and faces the next hurdle at 7.8558 (all-time high Sep.29). On the downside, a drop below 7.5082 (low Sep.25) would expose 7.4124 (low Sep.10) and finally 7.2019 (low Aug.21).