Lira getting Stronger - Why?

[yabanci]

A wonderful interview of mixed messages from Nihat Zeybekci yesterday.He didnt want to give instructions to the Central Bank about its future interest rate decisions as the Central Bank is independent BUT it should have cut interest rates BEFORE the February policy meeting that delivered its 0.25% reduction.

[Colwyn]

Basci and Babacan are going to a meeting at Erdogan at 4.45pm (Turkish time). Reports say the betting in the money markets is that there is going to be an outbreak of harmony - or at least a truce - and RTE will agree to let Basci do his job. RTE back down? Really? That will be a novelty. So will it be black smoke or white smoke coming from Erdogan Towers at the end of the meeting? Whichever it is will set the agenda for the lira over the coming weeks ... maybe, other things being equal, economic data permitting, until the mighty dollar steamrollers over it ...

[Colwyn]

I find the lira doing surprisingly well again today given that yesterday's meeting seemed to end in standoff rather than agreement. The lira has strengthened 0.6% against the dollar. There are signs that more people are realizing the impact of a weak lira on ordinary Turks. I didn't immediately see why food prices should be strongly affected until I read this in TodaysZaman "fertilizer, seed, fuel and pesticides make up between 80 and 85 percent of agricultural inputs, and Turkey imports all of them from abroad". So further increases in food prices seem likely to be on the way.

http://www.todayszaman.com/business_weakening-lira-likely-to-boost-food-prices_374942.html

[Colwyn]

In what could be the most feeble opening line of any Financial Times article, FT Fast says "Still no delight for Turkish lira" (doesn't it make you groan?). It is pointing to the end of the brief respite for the currency this week. This morning the dollar strengthened by 2%. Economy Minister Zeybekei has been saying this is OK it just because the $ is strong all round the world. But since the £ also strengthened by up to 1.5% this doesn't wash. He also says an overvalued lira would be a diaster. This may sound odd to people who have seen it losing 13% of its value in 2015 so far, but if the current level is still overvalued, it won't be long before it comes down to what Mr Z calls its "proper value". More sleepless nights for Basci? The next CB policy meeting is Tuesday.

[Colwyn]

No significant bumps for the Lira today; indeed it has strengthened 0.7% against the dollar. So what is it for tomorrow? "Hold steady, me hearties"?

[yabanci]

"Hold steady, me hearties"?

Which is exactly what the Central Bank did today at their monthly meeting leaving interest rates alone.Over to Reg now for his rant.

[KKOB]

British holidaymakers heading abroad over the summer should buy their holiday money now as sterling is set for a nosedive in the months leading up to the General Election, financial analysts have warned.

The upcoming UK election outcome is far from certain and history suggests that foreign exchange markets tend to punish sterling when this is the case.


http://www.dailymail.co.uk/money/news/article-2999168/Is-time-swap-pound-holiday-cash-Experts-warn-sterling-set-rocky-ride-ahead-general-election.html

[Colwyn]

I wonder if Government and Central Bank have come to an agreement about the dollar. Now that RTE has stopped ranting at Basci on a weekly basis the TRY has been doing well against £ and € for the last couple of weeks. Meanwhile the $ has been quietly creeping up - banging its head on 2.64 today. Has it been agreed that the dollar is doing well against just about every world currency (including £ and €) so it is futile for Turley to worry about it? That's certainly been the line advocated by some RTE close supporters.

Not going to help businesses though when it comes to servicing dollar-based investment in their companies and nor paying for imports fixed at dollar prices.

[Colwyn]

The dollar has gone over 2.65TL to a new record high. Nobody appears to making a fuss about it. Hmmm.

[usedbustickets]

Yes no fuss from Reg and co.  Nor indeed from the Brit community here in Turkey.  No surprise there though as the pound has remained steady around the  3.85 rate for the last few weeks, but that is due, in the main, to the pound falling - due to general election uncertainties - against most currencies, and so almost matching exactly the fall in the TL.

So if the result of the UK General Election is a majority, or a quickly convened coalition, government we could possibly see the £ to TL rate around 4TL to the £.  Not forgetting of course the possible effects, up or down, of the result of the Turkish General election.