Turkish Lira sells off to all time low

The Turkish lira came under major pressure yesterday with USD-TRY and reached a new all-time high of 2.77. 

Commerzbank assumes the following global and local factors contributed to currency movement: 

1. The risk-off mood surrounding EM in the wake of the Chinese sell-off is disproportionately affecting high-beta USD-crosses, which include USD-TRY and USD-BRL; no surprise.
2. More specifically, Turkey itself has entered a new chapter in military operations, opening up its strategic Incirlik airbase to US-led coalition to facilitate operations in Syria; such a direction had been in the works because of steady build up of intelligence that the IS had increased presence across the Syria border and was filtering into Turkey at a rapid rate. Actual parliament approval of strikes against targets in Syria followed attacks on the Turkish army and police forces in the border region. 
3. As a result of military operations, the Kurdish peace process has been derailed -- a new government will have to pick up the pieces at a later date. The net result of all this is that the security situation within Turkey has entered uncharted waters and now has the potential to delay much needed foreign investment; this in turn, will affect current-account financing. Renewed upward pressure on USD-TRY strengthens the expectation that CBT will have to raise rates by 150bps in coming months in order to stabilise the lira, says  Commerzbank.