Insights 
VT 
USD/TRY is steadily climbing, nearing the 42.00 mark, despite Turkey’s current account improvement. August saw a $5.5bn surplus, largely due to seasonal tourism, with a seasonally-adjusted trend moving away from deficit. The core balance, excluding gold and energy, rose to $10.0bn.
However, capital inflow gains made in July declined sharply in August, due to political uncertainties affecting perceptions. A strong net portfolio inflow of $5bn in July shifted to a net outflow of $662mn in August. This trend likely continued in September, influenced by chaotic court rulings in Istanbul.
Capital Account Sensitivity
The fundamental current-account may have benefited from tight monetary policy, yet the capital account remains sensitive to political developments. Consequently, the Lira maintains its depreciation trajectory, reflecting ongoing financial uncertainty and frequent volatility that undermines temporary currency stability.
Given the Turkish Lira’s continued slide, with USD/TRY now pushing past 42.50, we see the primary driver remains political uncertainty overwhelming any fundamental economic improvements. The current account surplus reported for August is old news, as capital flows have reversed direction. This tells us that positive economic data is failing to build a stable foundation for the currency.
To make this view more concrete, we can look at the latest figures from early October 2025. Data from the Institute of International Finance confirmed another net portfolio outflow of $810 million in September, continuing the trend seen in August. Furthermore, with the official September inflation data coming in last week at a stubborn 78% year-over-year, the real yield for investors remains deeply negative, discouraging any new capital from entering the market.
Strategies for Traders Amid Uncertainty
For derivative traders, this environment of high uncertainty means implied volatility in USD/TRY options will remain elevated. Buying long-dated call options on USD/TRY is likely to be expensive due to the high volatility premium. Therefore, focusing on shorter-term strategies that capitalize on the steady depreciation may be more effective.
We believe traders should consider strategies that benefit from this upward grind in USD/TRY while managing costs. This could involve buying near-term at-the-money USD calls or constructing call spreads to cap both the potential profit and the upfront cost. Selling uncovered TRY calls is extremely risky, as any sudden political development could cause a dramatic spike.
Looking back, we saw similar dynamics during the turbulent periods of 2018 and 2021, where political headlines consistently overrode economic policy. In those instances, the lira experienced rapid devaluations that defied traditional analysis, a pattern which seems to be repeating now. The key takeaway is that the political risk factor is the dominant variable, making any prediction of a top in USD/TRY unreliable.
