Tensions are growing between the United States and Turkey. Last night, both countries have suspended part of their visa services. Indeed, an employee of the US embassy has been arrested on charges of espionage at Istanbul. As a result, US and Turkey have decided stop issuing non-immigrant visas for Turkish travellers.
The USDTRY pair strongly surged (more than 6%) out of those decisions probably on escalation fears and has reached its highest level since April (3.80 TRY for one single dollar note). The Turkey-US relations are turning to a worse situation. Geopolitical tensions are strongly growing. Actually in the background, tensions are escalating because of the US support to Syrian Kurdish rebels which Turkey considers as a terrorist group.
We definitely believe this can reveal more underlying tensions as Turkey is getting closer and closer of Russia and Iran. In the short-term, the USDTRY may nonetheless bounce back lower as the situation unravels. Yet, we believe that global tensions are overall on the rise and should weigh on the TRY.
By Yann Quelenn