USD/TRY: A “rational” slap sends the lira to record lows past 23.00

• USD/TRY clinches fresh all-time highs past 23.00.
• Türkiye lenders appear to have halted their support for the lira.
• Investors home and abroad remain skeptical of the move so far.

The Turkish currency remains in free-fall, which motivates USD/TRY to advance to new record highs north of the 23.0000 hurdle on Wednesday.

USD/TRY looks at the government for clues

USD/TRY maintains the upside bias well in place on Wednesday as investors continue to assess the recent win by President Erdogan at the May 28 elections and the subsequent appointment of market-friendly finance minister M. Simsek.

In the meantime, Wednesday’s collapse of the lira seems to be attributed to state lenders discontinuing their sale of dollars to support the currency, indicating a shift in the new economic administration's approach. This change suggests a departure from expensive interventions and a move towards adopting more conventional economic policies.

So far, the Turkish currency has already depreciated around 24% since the start of the new year, while the drop has reached nearly 170% since the Turkish central bank (CBRT) embarked on its easing cycle in August 2021.

What to look for around TRY

USD/TRY maintains its upside bias well in place, always underpinned by the relentless meltdown of the Turkish currency.

In the meantime, investors are expected to closely monitor upcoming decisions on monetary policy, particularly after President R. T. Erdogan named former economy chief M. Simsek as the new finance minister following the cabinet reshuffle in the wake of the May 28 second round of general elections.

The appointment of Simsek has been welcomed with optimism by market members in spite of the fact that it is not yet clear whether his orthodox stance on monetary policy can survive within Erdogan’s inclination to battle inflation via lower interest rates.

In a more macro scenario, price action around the Turkish lira is supposed to continue to spin around the performance of energy and commodity prices - which are directly correlated to developments from the war in Ukraine, broad risk appetite trends, and dollar dynamics.

Key events in Türkiye this week: Industrial Production (Friday).

Eminent issues on the back boiler: Persistent skepticism over the CBRT credibility/independence. Absence of structural reforms. Bouts of geopolitical concerns.

USD/TRY key levels

So far, the pair is gaining 7.49% at 23.0676 and faces the next hurdle at 23.1582 (all-time high June 7) followed by 24.00 (round level). On the downside, a break below 19.6547 (55-day SMA) would expose 19.2926 (100-day SMA) and finally 18.9152 (200-day SMA).