USD/TRY advances to fresh all-time highs near 18.6000

• USD/TRY gathers extra upside traction near 18.60.
• Türkiye Manufacturing PMI eased to 46.90 during last month.
• Inflation rose to 24-year highs above 83% in September.

The Turkish lira accelerates its depreciation and lifts USD/TRY to a new all-time high past 18.57 on Monday.

USD/TRY stronger post-CPI, looks to USD rally

USD/TRY resumes the upside on Monday after another release of Turkish inflation figures saw the CPI run at the hottest pace since July 1998 at 83.45% YoY, while consumer prices rose 3.08% vs. the previous month. Also weighing on the sentiment, Producer Prices increased at an annualized 151.50% YoY and 4.78% MoM.

Furthermore, higher costs in transportation and food coupled with an important increase in housing prices were behind another uptick in the domestic CPI in September.

Additional releases noted the Manufacturing PMI ticked a tad lower to 46.90 in September (from 47.40).

Extra gains in the pair also come from the better tone in the greenback, which adds to Friday’s advance and keeps the mood in the risk complex subdued.

The lira, therefore, enters its 10^th consecutive month with losses and already retreats more than 40% so far this year (vs. 44% in all 2021).

What to look for around TRY

USD/TRY keeps navigating the area of all-time tops near 18.60 amidst the combination of omnipresent lira weakness and the unabated rally in the dollar.

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, the lira is poised to keep suffering against the backdrop of Ankara’s plans to prioritize growth (via higher exports and tourism revenue) and the improvement in the current account.

Key events in Türkiye this week: CPI, Producer Prices, Manufacturing PMI (Monday).

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 gaining 0.59% at 18.5616 and faces the next hurdle at 18.5737 (all-time high October 3) followed by 19.00 (round level). On the downside, a break below 18.0801 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).