The Turkish Lira is in free fall and the trend does not appear to be ending any time soon with its exchange rate against the world’s major currencies accelerating as exemplified here below.
Turkish Lira / Japanese Yen Monthly Exchange Rate
Swiss Franc / Turkish Lira Exchange Rate
US Dollar / Turkish Lira Monthly Exchange Rate
Euro / Turkish Lira Monthly Exchange Rate
The Turkish Lira is in a tail spin with no respite in sight. The observed divergence of the volatility bands foretells more pain ahead. The trend is more dynamic against the US Dollar, the Japanese Yen and the Swiss Franc but less so against the Euro.
Since the Turkish Lira now pays a massive interest rate of 17.75% it may not be a good idea to sell it short due to the cost of holding a short position that could eat into any potential profit excepted for trading short term moves. We tend to prefer fading rallies when the exchange rates become overextended when gaping away from the proximate volatility band, and to do so preferably against the Euro with the EURTRY pair seemingly closer to a reversal than the other pairs presented above.
The Turkish general elections on 24 June and 8 July 2018 could be a catalyst for an acceleration of the Turkish Lira demise in case President Recep Tayyip Erdoğan becomes reelected but the writing is already on the wall.