USD/TRY moves to fresh all-time tops near 10.6000 as lira collapses

• USD/TRY records new record high near 10.6000.
• The lira depreciates further on Erdogan comments.
• The CBRT meets on Thursday and could reduce rates further.

The lira keeps suffering the wrath of sellers and now pushes USD/TRY to clinch new all-time peaks in the proximity of 10.6000 midweek.

USD/TRY up on USD rally, lira weakness

USD/TRY extends the upside for yet another session on Wednesday on the back of the better note in the US dollar and the tireless selloff in the Turkish currency ahead of the key meeting by the Turkish central bank (CBRT) on Thursday.

The lira saw its depreciation gathering extra steam after President Erdogan said earlier on Wednesday that inflation is the result of high interest rates, adding that he will not allow people to be crushed by rates and that he won’t stand with defenders of interest rates.

Comments from Erdogan not only seem to have precipitated the selloff in the lira, but they could have also paved the way for another reduction of the One-Week Repo Rare at the CBRT meeting on Thursday.

Consensus on the next move by the CBRT now appears somewhat divided, as many think that the recent collapse in the lira could motivate the central bank to take a break.

My call: A 100 bps cut.

USD/TRY key levels

So far, the pair is gaining 1.00% at 10.4331 and a drop below 9.8395 (high Oct.25) would expose 9.7410 (20-day SMA) and finally 9.4722 (monthly low Nov.2). On the other hand, the next up barrier lines up at 10.5583 (all-time high Nov.17) followed by 11.0000 (round level).