USD/TRY extends the march north to the vicinity of 23.4000

The continuation of the intense sell-off in the Turkish lira lifts USD/TRY to a new all-time peak near the 23.4000 mark on Thursday.

USD/TRY risks a deeper pullback

Gains in USD/TRY continue to accelerate on Thursday, as the pair has already advanced around 12% since the opening bell on Monday and following the appointment of M. Simsek as Treasury and Finance Minister (on Saturday).

Indeed, the bearish tone in the lira remains everything but abated in a context where market participants keep monitoring the "intentional devaluation" implemented by the new economic team designated by Erdogan’s administration in the wake of the victory in the May 28 elections.

In the meantime, the sharp retracement in the lira gathered extra pace after national lenders stopped selling US dollars to defend the currency this week, a move deemed quite rational and more in line with economic orthodoxy.

So far, the Turkish currency has already depreciated over 25% since the start of the new year, while the drop has reached more than 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 0.80% at 23.3573 and faces the next hurdle at 23.3881 (all-time high June 7) followed by 24.00 (round level). On the downside, a break below 19.7356 (55-day SMA) would expose 19.3401 (100-day SMA) and finally 18.9416 (200-day SMA).