December 4, 2021

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The collapse of the Turkish lira .. How long will it last, what do experts say?

The collapse of the Turkish lira .. How long will it last, what do experts say?

The Turkish lira lost more than 38 percent of its value throughout the year, especially as the central bank began to cut interest rates and recorded 11.30 lira against the dollar in recent days.

In terms of markets, last week was again an important one as the central bank’s monetary policy committee decided to cut 100 basis points. Subsequently, the policy rate was reduced to 15 per cent.

Every central bank decision since September has turned the markets upside down, and despite the rate cut in line with expectations of the last meeting, the statement in the wording of the conclusion that “rate cuts will end in December” is once again surprising.

Following the Centre’s decision to cut interest rates last Thursday, the dollar surpassed the 11-Turkish lira, while interest rates on 10-year bonds rose to 20.44 percent and the 5-year risk premium in Turkey to 436 points.

Foreign currency purchases continued in the previous week as foreign currency deposit accounts in banks increased by $ 1.9 billion in one week. However, experts say that those who buy foreign exchange are advised not to sell in a hurry.

In times of increasing uncertainty and instability, decisions made in panic can hurt savers. Therefore, it makes more sense to create a portfolio of investment instruments such as forex, deposits, securities, gold and stocks than to lay eggs in a single basket.

The 10.65 Turkish lira has been the strongest point of the recent rally against the US dollar against the Turkish lira.

However, the Turkish lira has crossed that point. From a technical point of view, the most important factor leading to a rally is the breakdown of this level. At the moment, the most important resistance point is at the level of 11.37 TL. Because this level is the resistance point of the trend line.

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Technically, if the above level exceeds 11.37 TL, there is a risk that it will gradually rise to 12.20 TL and above.

A Turkish economist expects the dollar exchange rate to reach 15 lira by the end of this year.

Gaya Ardik, Sputnik, a faculty member at Perry Presidential University in Istanbul, said, “I believe the Turkish central bank’s intervention in the central bank’s fluctuations is the right strategy because a higher foreign exchange rate may contribute. , Thus filling the current account deficit as a result of declining demand for foreign currency and declining inflation rates.

The Turkish expert added: “The central bank’s strategy of deliberately raising the foreign exchange rate and the policy pursued by Turkish President Recep Tayyip Erdogan on the advice of the Turkish government is wrong and could lead to the collapse of Turkey. The country’s economic situation is worse than the lira’s. ”

The expert continued, “I do not expect the outcome of this current situation to be good, because the foreign exchange rate is one of the most important determinants of inflation and the high exchange rate of the currency against the Turkish lira leads to higher inflation. Prices and prices of all commodities.”

“The dollar exchange rate is likely to reach 15 Turkish lira by the end of this year, especially if the central bank lowers interest rates,” he added.