Forex frenzy: Euro climbs to 38.13 TL, dollar at 34.00 TL

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

Dollar reaches new balance of 34.00 TL

• The dollar started the week at 33.99 TL, a slight dip from last week’s peak of 34.05 TL. Despite minor fluctuations, the dollar is expected to stabilize around 34.00 TL.
• In Istanbul’s Grand Bazaar, physical dollar transactions are occurring within a range of 33.07 TL to 34.13 TL, with increased attention to widening margins in the physical forex market.
• Key technical levels to watch include a support level at 33.94 TL and resistance at 34.06 TL.
• 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 TL interest rates hover above 50%, both supporting a relatively stable outlook for the dollar.

Euro outpaces dollar, surpasses 38.00 TL

• The euro began the week at 38.02 TL and quickly tested a record level of 38.13 TL.
• The euro’s ascent has been more pronounced than the dollar’s, with an impressive 5.75% increase since closing July at 35.95 TL. 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 TL to 38.11 TL, 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.