Turkey: Erdogan puts lira under strain – TDS

Piotr Matys, an strategist at Rabobank predicts the USD/TRY pair will have difficulties to keep the 6.00 level after an escalation of tensions between Turkey and Syria. 

Key quotes

“The Turkish lira remains in the spotlights due to rising risk of a full-scale military conflict between Turkey and Syria. President Erdogan vowed to push forces loyal to Syrian President Assad from Syria’s north-western province of Idlib. `No one is safe if blood of Turkish troops are spilled`, President Erdogan said.”  

“A full-scale military confrontation between Turkey and the Assad regime – supported by Russia – would substantially increase upside pressure on USD/TRY. Should such a negative scenario for the lira unfold, state banks would struggle to keep USD/TRY anchored to the 6.00 level. They have been intervening on behalf of the central bank allegedly selling more than USD 4bn throughout last week. Yet, it proved insufficient to keep USD/TRY below the psychological level of 6.00 that was finally breached on Friday.”