When there were no elections in Turkey, the lira was declining. The lira was declining when the elections were held. Once the elections were over, the lira…of course continued to fall. Let’s explore whether further developments are still predictable and what we can expect from the Turkish currency in general.
TRY recently reached historic levels. The recent exchange rate has exceeded 20 lira per dollar, USD/Turkish Lira Chart It shows a relatively modest 7% decline over 6 months. Maybe it’s not so bad?
It’s actually even scarier. A closer look reveals a staggering 332% rise in the US dollar against the lira over the past five years. By the way, did you know that you can predict multiple movements in the forex and stock markets?For that you need to do the following use the economic calendarwhich includes all major economic events.
Recep Erdogan has won the Turkish presidential election and will remain president for the next five years. This is important for the foreign exchange market, as President Erdogan’s approach to economic policy is concrete. While most emerging economies have raised interest rates to fight inflation, Turkey has tried to fight inflation by keeping interest rates low and stimulating economic activity among its citizens. Nevertheless, Turkey faces an inflation rate of over 60% in 2022.
Erdogan’s victory therefore prompted investors to expect the continuation of these policies, further accelerating the lira’s depreciation. Turkey’s key interest rates have been steadily declining since 2021.
All of this comes with massive currency intervention and various seemingly new measures to support the lira (yes, the decline is still as big as it can be). As a result, such actions have dried up government funds and led to a mass exodus of foreign investors from the unreliable Turkish market.
If all goes on the same note, the price level could rise further, foreign exchange reserves could be completely depleted, and the crisis could become more dangerous. A pessimistic scenario suggests that the USD/Turkish lira rate could reach $28-30 by the end of 2023.
So what can stop this? Well, any signs of a correction in economic policy could (at least in the short term) lead to lira appreciation. Additionally, the value of the lira may temporarily increase during the summer tourist season.
Please note that you need to be extra careful when dealing with volatile currency pairs like USD/TRY. That is why, even if you are confident in the expert’s predictions, you should conduct a thorough analysis before making any trades.
Disclaimer: The views expressed in this article are those of the author and may not reflect the views of the author. Kitoko Metals Co., Ltd. The author makes every effort to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the authors can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation of an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the authors of this article do not accept liability for loss and/or damage resulting from the use of this publication.
