USD/TRY pushes higher and flirts with 18.6000

• USD/TRY trades at shouting distance from 18.6000.
• The lira loses ground for the 10^th month in a row so far.
• US Nonfarm Payrolls came in above estimates in September.

Further gains in the dollar keeps USD/TRY bid and closer to the 18.6000 level at the end of the week.

USD/TRY bid on USD-strength

USD/TRY keeps the upbeat note well in place in the second half of the week and appears further bid amidst the continuation of the weekly recovery in the greenback.

Indeed, another solid print of US Nonfarm Payrolls (+263K) coupled with a drop in the jobless rate and higher US yields lend extra wings to the buck and collaborates with the relentless upside in spot.

It is worth noting that the pair has so far entered the 10^th consecutive month with gains. Furthermore, spot only printed monthly gains in only four months since 2021 (January, July, August and December 2021).

On another front, news cited South Korea transferred $780M to the Turkish central bank (CBRT) last week as part of a swap deal worth $2 billion and signed back in 2021. Furthermore around the central bank, net FX reserves rose to around $9.70B by September 30 vs. a 2-decade low of just above $6B recorded in July.

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 renewed bid bias 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 0.7% at 18.5866 and faces the next hurdle at 18.5908 (all-time high October 4) followed by 19.00 (round level). On the downside, a break below 18.1451 (55-day SMA) would expose 17.8590 (weekly low August 17) and finally 17.7586 (monthly low).