Lira getting Stronger - Why?

[JohnF]

Bugger.

JF

[yabanci]

Turkey's annual inflation  figure rose 1.3% in May to take it up to 12.15%. Not had any major effect on the lira rate, yet.

http://www.hurriyetdailynews.com/turkeys-annual-inflation-at-10-85-pct-in-april-132754

[JohnF]

No, but it will.

Some commentators are now suggesting Turkey may need an IMF bail out, comparing its economic situation to Argentina. 

This was in Al-Monitor a few days ago: "Is Turkey on course to follow Argentina’s footsteps? Korkut Boratav, one of Turkey’s most respected economists, said a run to the IMF is almost inevitable for Turkey in 2019, regardless of who wins the upcoming presidential and parliamentary elections."

Lets hope he is wrong.

JF

[yabanci]

The TCB has hiked interest rates again, this time by another 1.25%.


http://www.hurriyetdailynews.com/turkey-central-bank-makes-decisive-hike-to-main-interest-rate-lira-firms-132940

[JohnF]

Given the lira a boost, up against the three main currencies.  Heading for under 6 to the quid, sitting at 6.01 just now.

JF

[JohnF]

Looks like the markets just don't have confidence in the lira, as despite the rate increase, it's slipping back.

I think the recent downgrading of seventeen Turkish banks by Moody's has had an impact, coupled with a further downgrade of Turkey's sovereign rating today - as the FT puts it:

Ratings agency Moody’s cut Turkey’s sovereign rating further into junk territory overnight, citing a continued weakening of its economic and political institutions and the increased risks from its wide current account deficit.

Not good.

JF

[Colwyn]

On Saturday Guven Sak's article in Hurriyet outlined Turkey's problem in having a very high private debt from years of funding investment from foreign capital. This was OK in an era of Quantitative Easing with lots of cheap money available but the world is now moving to Quantative Tightening and Turkey needs a to lower its indebtedness. He suggests that Turkey needs a stabilization package to manage this (like Argentina); but it doesn't have one. He concluded: "That is why a simple rate hike is not enough for the lira to stabilize, even in the short term".
http://www.hurriyetdailynews.com/opinion/guven-sak/whats-the-matter-with-the-turkish-lira-133025

It didn't take long to confirm his view: the lira is down 1.5% against the dollar this morning.

[davybill]

Dollars gone up, after Trumps  agreement with Rocket Man.

[yabanci]

Looks a little bit like he is leaving Şimşek and Çetinkaya (TCB governor) to get on with the job.

JF

That did'nt last too long then.

http://www.hurriyetdailynews.com/interest-rates-need-to-fall-for-investment-says-erdogan-133526

[JohnF]

I know.  Too much erdoganomics going on in the background.

JF