Published On: Wed, Apr 11th, 2018

Where is Turkish Lira heading against US dollar in rising tensions in the world?

Where is Turkish Lira heading against US dollar in rising tensions in the world?

US Dollar Turkish Lira –

Turkish Lira has been losing value against US dollar and is currently at the lowest rate ever in its history. This is obviously quite frustrating for the administration but even worse for the citizens as most negativities are directly reflected on the economy and people, via inflation, tax hikes etc. The question is how is it possible that the Turkish Liras is losing value at such a fast pace when the government keeps repeating what a successful growth performance was recorded in 2017.

In fact the figures say Turkey managed to achieve a growth performance of 7.4 percent in 2017, one of the best performances globally. However, it is not possible to say this growth has been reflected to the wealth of its citizens and on the contrary ordinary citizen in the street has become even poorer.The inflation has been o ut of control again for a while and the administration has not been able to achieve its targets in this regard. It is possible to see a lot of criticism as to the country needs to produce more rather than try to manage the day based on commercial and financial operations and construction projects mainly.

On top of all above, the country is now facing other major issues with negative impacts on the economy: The climbing tensions in the region and Syria in specific and the rock-bottom situation of political relations between Russia and the west, USA to be in forefront certainly.

Sanctions imposed by USA and targeting Russia on top of the risk of climbing tensions in Syria has hit Turkish Lira, after the Ruble. These two currencies have taken the first two positions in depreciating currencies of developing countries. Turkish Lira has broken all-time record (negative one obviously) with 4.13 against US dollar.

The picture is quite clear; Turkey’s economy with high fragility due to deteriorated macro indicators such as high inflation and high current account deficit, ranks top of the list among economies most effected by the trade war among Russia and USA (together with the western block), sanctions imposed on Russia, the war risk in the Middle East etc.

Experts say it is quite likely the US dollar could continue with its upward movement and they maintain the expectation of 4.20 – 4.30 for the year-round with a resistance point at 4.16. When looked at the broader picture it is possible to see that the pricing on the psychological band of 4.00 has become new normal and as the prospect of a withdrawal is not very strong, it is expected that the main movement waves will carry on with the upward trend on this psychological band.

This is certainly not to forget that the recently climbing tension between USA and Iran could severely add to the undesired picture which the markets need to follow very closely in the coming days.

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