Lira

[jonuzumlu]

I found this interesting
http://www.theguardian.com/business/2014/jan/24/emerging-market-currency-chaos-stock-markets

[kevin3]

The AKP will be along shortly to tell you the Guardian is part of the   "Parallel Papers "

[jonuzumlu]

Parallel Universe more likely.

I posted this article because

a) The Turkish Deputy PM offers helpful clarification

b) I think the reporter was named perfectly for a career as a Telegraph scribe



 http://www.telegraph.co.uk/finance/financetopics/davos/10596296/Emerging-market-rout-turns-serious-punctures-exuberance-in-Davos.html

[Colwyn]

Well Ali Babacan might be right about one thing; albeit at the cost showing that his boss is wrong. Despite all RTE's huffing and puffing about foreign financial plotters bringing down the Lira this FT article (see below) says very little foreign withdrawal has taken place either from shares (down this year from 66% to 62%) or from bonds (down from 25% to 22%). No sign here of large capital outflows. So what accounts for the drop in the Lira? According to the FT: "So far, the currency’s weakness has been driven by Turkish companies and banks and by households switching savings into dollars." This runs contrary to what has widely been believed which is that RTE is scaring off international investors, but it seems to be backed up by data. Instead it seems that it is the Turkish (companies and individuals) who are in a headlong rush to get out of Lira and into some safer currency - especially $.


www.ft.com/cms/s/0/32e28ff2-81f2-11e3-87d5-00144feab7de.html


Sorry. This links seems not to be working. But you can get to the article by Googling "ft lira tumbles" [other search engines are available].

[Scunner]

Would that suggest 'everyday' Turkish people have lost faith in RTE? Because it was them who voted his party into government - could mean they're on the way out? I still thought he would walk any future election because most of the (non-coastal) country support him come what may.

[Colwyn]

I would assume that the people getting out of Lira would be wealthy individuals who 'manage their portfolio'. Erdogan' support amongst poorer citizens, especially in central and eastern Anatolia are not likely to be taking much notice of this crisis yet. They may start to do so when prices really start rising steeply.

[Scunner]

I'm not so sure - I suppose my thoughts are influenced by memories of the queues of locals at Turkish banks on a Friday afternoon, taking all their money out because it was a Bank holiday weekend and they didn't fully trust the bank to last 3 days. They'd be there again on the Tuesday to put it all back in.

[Colwyn]

If you're right S. the April elections will be even more interesting than already anticipated.

[JohnF]

I would assume that the people getting out of Lira would be wealthy individuals who 'manage their portfolio'.

Not necessarily - many Turks do not trust the lira and much prefer "hard" currencies or gold when it comes to their nest eggs.  That's why it's so easy (and common place) to open up GBP/EUR/USD accounts with local banks.

I also suspect a lot of businesses are increasing their foreign currency reserves as opposed to simply switching from the lira.  Within the business community contracts are often written in USD/EUR in preference to the lira.  With regards to employment contracts, I knew a few folks in Istanbul who have lira contracts but they really are in the minority - most go for EUR/USD/GBP.

JF

[Colwyn]

That's interesting John. I'd never thought about why Turkish banks offered non-Lira accounts so readily. I guess I had assumed it was just in expat areas and large cities like Ankara, Istanbul, Izmir. Quite a contrast with Brits moving to Turkey, many of whom seem enthusiastic about plunging their £s into TL account to get their hands on the "large" interest rates - although not so large when you take inflation into account.