Commerzbank said the Turkish lira is nearing its quarter-end target of 44.0 USD/TRY. It linked the move to higher inflation expectations, weaker external balances and falling reserves.
Turkey’s central bank monthly survey showed market expectations for end-2026 inflation rising by about 1 percentage point, from 23.2% to 24.1%. The figures cited also include an end-2027 inflation forecast of 17%.
Balance of payments data for December showed a wider seasonally adjusted current-account deficit. The report also noted that capital inflows had weakened.
The bank said these factors point to ongoing lira depreciation against the US dollar. It also referenced repeated breaks through new exchange-rate levels.
We see the Turkish Lira is facing consistent pressure, pushing it toward the 44.0 level against the US dollar. This is driven by market doubts about the country’s economic rebalancing, especially as inflation expectations keep rising. The latest official data from January shows annual inflation remains elevated at 69.5%, confirming that price pressures are not yet contained.
Given the market’s end-of-year inflation forecast has now risen to 24.1%, it signals a belief that there will be virtually no real improvement from the current situation. This pessimism, which we also observed through the sentiment shifts in 2025, makes long positions on the USD/TRY pair look attractive. Traders could consider buying USD/TRY call options with strike prices above the current spot rate to capitalize on the expected continued weakness.
The balance of payments data is also not encouraging, with a seasonally-adjusted current account deficit that is widening again and a noticeable drying up of capital inflows. Looking back at similar periods in 2024 and 2025, such trends often preceded sharp moves, and the central bank’s net reserves have reportedly declined by $4.8 billion in the last month alone. This situation reinforces the case for positioning for further lira depreciation, possibly through longer-dated USD/TRY futures contracts that capture the steady depreciation path.
