The Turkish lira extended the selloff to the 20.40/45 band.

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• The Turkish lira extended the selloff to the 20.40/45 band.
• The lira’s exodus accelerated after Erdogan’s win on Sunday.
• Erdogan reaffirmed the continuation of a low-rate policy.

The Turkish lira (TRY) magnifies its decline vs. the greenback and propels USD/TRY to a new record top north of 20.40 on turnaround Tuesday.

The march north in USD/TRY remained unabated on Tuesday amidst the unabated sell-off in the lira, which was particularly magnified after incumbent Recep Tayyip Erdogan secured his victory in the 2023 presidential election, extending his rule into a third decade in power.

The deep pullback in TRY comes pari passu with quite a pessimistic economic outlook for the country, which can even get worse after President Erdogan reaffirmed the continuation of the unorthodox (unreal? Non-sensical?) policy of tackling the elevated inflation with low interest rates.

Further concerns also emerge in a context where the country’s FX reserves do everything but grow and the current account deficit flirts with its widest in series history.

It is worth noting that the pair has closed with gains in every single week since March 1.

Later on Tuesday, Trade Balance figures for the month of April will be the sole release in the domestic docket ahead of Q1 GDP results on Wednesday and the Manufacturing PMI on Thursday.

So far, the pair is gaining 1.37% at 20.3879 and faces the next hurdle at 20.4196 (all-time high May 30) followed by 21.00 (round level). On the downside, a break below 19.3967 (55-day SMA) would expose 19.1366 (100-day SMA) and finally 18.8192 (200-day SMA).

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