USD/TRY: State banks may not be able to prevent a break higher – Rabobank

Escalating geopolitical tensions related to Syria had a strong impact on the lira, which plunged to the lowest level versus the dollar since September 2018, strategists at Rabobank report.

Key quotes

“33 Turkish soldiers were killed in an airstrike in the northwestern Syrian province of Idlib. ‘Assad and regime forces (supported by Russia) will pay a heavy price for this heinous attack,’ Turkey’s Vice President Oktay said.”

“Despite a clear escalation of tensions it is encouraging that President Erdogan and President Putin discussed the latest developments in Syria that was ‘devoted to the need to do everything to fulfil the original agreements on the Idlib de-escalation zone,’ Russia’s Foreign Minister Lavrov said.”

“USD/TRY has reached another crucial technical juncture in the form of a resistance area around the 6.25 level. State banks may defend it by selling USDs, but as long as global markets are in a panic mode and geopolitical risk remains elevated, they may not be able to prevent a break higher in USD/TRY.”