Commerzbank’s Tatha Ghose warns that USD/TRY is gaining momentum towards 45.00 as Turkey faces a worsening external backdrop and extended energy price shock. He notes that prior Lira stability relied on heavy FX intervention, depleting reserves, while capital inflows have stalled and the current account deficit widened. Fitch’s outlook cut underscores rising risks from continued reserve drawdown.

Intervention limits and external imbalances

"USD/TRY is gaining momentum, approaching the 45.00 mark as the external market environment worsens and the energy price shock extends further."

"The exchange rate was anyway on a depreciating path – and was stabilised by heavy intervention at the expense of FX reserves over the past month, something which cannot be continued indefinitely."

"Latest data highlight a wider current-account deficit in Turkey as well as stop to foreign capital inflow because optimism about falling inflation has faded since February."

"CBT conducted more than USD 50bn in FX interventions to support the lira, Fitch noted and such a rate of drawdown represents significant risks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)