Euro climbs to TL 38.13, dollar at TL 34, taking forex frenzy notch up

The Turkish lira faces significant pressure as both the dollar and euro hit record highs, with the dollar stabilizing at ₺34.00 and the euro surging past ₺38.00, reflecting the continued volatility in forex markets.

Dollar reaches new balance of ₺34.00

• The dollar started the week at ₺33.99, a slight dip from last week’s peak of ₺34.05. Despite minor fluctuations, the dollar is expected to stabilize around ₺34.00.
• In Istanbul’s Grand Bazaar, physical dollar transactions are occurring within a range of ₺33.07 to ₺34.13, with increased attention to widening margins in the physical forex market.
• Key technical levels to watch include a support level at ₺33.94 and resistance at ₺34.06.
• The Turkish lira’s ongoing depreciation can be attributed to several factors, including foreign capital movements, domestic demand, and the unwinding of KKM (Currency Protected Deposit) accounts.
• Türkiye’s 5-year CDS risk premium remains at 265, and overnight Turkish lira interest rates hover above 50%, both supporting a relatively stable outlook for the dollar.

Euro outpaces dollar, surpasses ₺38.00

• The euro began the week at ₺38.02 and quickly tested a record level of ₺38.13.
• The euro’s ascent has been more pronounced than the dollar’s, with an impressive 5.75% increase since closing July at ₺35.95. In comparison, the dollar saw a 2.5% rise in the same period.
• Transactions in Istanbul’s Grand Bazaar for the euro range from ₺37.92 to ₺38.11, indicating sustained upward momentum.
• The euro’s rise is partly fueled by the EUR/USD parity reaching 1.12, its highest level in the past year. Analysts attribute this to expectations of a 2.25-point interest rate cut in the U.S. and a 1.25-point cut in Europe by the end of 2025.
• This euro strength, relative to both the dollar and the lira, is particularly beneficial for Turkish exporters. The favorable exchange rate allows exporters to gain additional profits when importing in dollars and exporting in euros.

What’s next?

• Analysts predict that despite current volatility, the Turkish Central Bank’s strong reserves and ongoing tight monetary policy will help limit further depreciation of the lira.
• However, continued global market shifts and domestic economic policies will remain key determinants of the dollar and euro’s trajectory in the coming weeks.