USD/TRY: Lira recovers slightly from record low

• Lira hit a record low of 7.71 early Thursday. 
• Risk of a balance of payment crisis looms large despite the emergency rate hike. 

While the Turkish Lira has recovered somewhat from the new record low reached early Thursday, the risks remain skewed to the downside. 

Lira is trading at 7.6737 per US dollar at press time, having hit a lifetime low of 7.71 an hour ago. The bounce could be attributed to oversold conditions, given the currency has declined by over 10% this quarter alone and nearly 30% this year. 

Moreover, Turkey still faces the risk of a full-blown balance of payment crisis. Indeed, the country's central bank steeply raised interest rates from 13.5% to 16.5% on Wednesday. Even so, Lira fell by nearly 0.4% on Wednesday and reached new record lows today. 

The emergency rate hike seems to have conveyed panic to markets. "The central bank rate hike is seen off-limits," popular macro analyst Holger Zscahepitz on Thursday. 

As such, the path of least resistance for Lira remains to the downside.