Turkish Lira Crisis

Adam Lemon

Turkish LiraOver the weekend, I was concerned that we would see the Turkish Lira collapse as Forex markets opened for the week. Although the Lira did fall further yesterday to get slightly lower than 7 to 1 U.S. Dollar, it has recovered in recent hours to trade around 6.5. The most interesting thing about this firming is that it has taken place naturally, without any emergency measures or rate hikes from the Turkish central bank. The free market seems to have been satisfied with 7, for now. It is true the Turkish central bank did take minor measures to strengthen liquidity, and that a few Forex transactions experienced a little delay, but no serious measures were taken.

President Erdogan made a speech earlier today in which he repeated his previous strong backing for the Lira and the policy of the central bank. He threatened a national boycott of American electronic goods such as the iPhone in response to the recent U.S. sanctions. He says that there is no fundamental reason for the fall in the Lira and states there is a “plot” and “attack” against Turkey. However, he acknowledges that inflation is too high, and that plus the high amount of U.S. Dollar-denominated corporate debt, are the true causes of the current crisis. He is also repeating very veiled threats to leave NATO and cooperate more closely with countries hostile to the U.S. – such measures would certainly have a much greater impact upon the U.S. than a Turkish boycott of the iPhone!

The Forex market generally has been quiet today. This crisis will certainly develop further, but is currently in a lull, and it seems no new initiatives will be taken by either side for the time being. It is hard to see Erdogan accepting the political and personal humiliation of an emergency rate hike, but this will again be on the table if the Lira begins to fall sharply again to new all-time low prices.

A piece of good news: feared “contagion” spreading to certain European banks seems to be exaggerated.

About the Author
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

Comments

Did you have a good experience with this broker? A bad one? Tell our team and traders worldwide about your experience in our User Reviews tab. Your email address will not be posted.

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

0 User comments
Add Comment

exclamation mark

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Read more
Add new comment
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.