Lira getting Stronger - Why?

[Colwyn]

Istanbul Stock Exchange has dropped by 12% since the alleged coup.

[JohnF]

A quote from the Deputy Prime Minister, Nurettin Canikli, has pretty much confirmed what most thought - the TCB is now under control of the wee fella.

“We will cut the rates below 10 percent without creating pressure for the banking sector in line with President Erdoğan’s recommendations”

Not good for the economy when the TCB is doing the bidding of someone who ultimately wants zero percent interest rates...

JF

[davybill]

Now REg has made friends with Russia things will only get better.

[Colwyn]

Not good for the economy when the TCB is doing the bidding of someone who ultimately wants zero percent interest rates...

I have a basic understanding how usury-free banking works, but not Islamic Central Banking in the absence of interest. I thought I might try to get the beginnings of an understanding of it. It is hard going but here is a relatively brief overview of the basic economic theory - not easy but it did give me some glimmer of understanding.
http://www.islamic-banking.com/iarticle_1.aspx

[JohnF]

As I've mentioned before, Islamic banking is now big business (   ) in Turkey.  Most of the major law firms are well geared up now doing deals and helping investors get involved in projects that conform to the pretty strict rules associated with it.

One of the issues I see is that on one hand Turkey is touting itself in the international financial arenas for investment, but on the other hand some in government have this goal of reducing interest rates to zero thus making it potentially unattractive to either non-Islamic investors or those without the deep understanding of the Islamic banking system. 

Basci knew the score - he knew what was best for the Republic of Turkey in terms of the economy.  Basci is gone.  The TCB is now being effectively run from the wee mans front room with his pals doing exactly what he tells them to do.  What a way to run a country...

JF

[Colwyn]

Islamic Central Banks have a range of tools at their disposal to regulate the currency in the absence of interest rates. Here are some ("mudaraba" refers to the relationship between the provider of funds and the recipient of fuds):   


Fixing a minimum and/ or maximum ratio of profit for Islamic banks in their joint venture and Mudaraba activities.  These ratios may vary for different fields of activity.

Designation of various fields for investment and partnership within the framework of the approved economic policies, and the fixing of a minimum prospective rate of profit for the various investment and partnership projects. The minimum prospective rate of profit may vary with respect to different branches of activity.

Fixing a minimum and maximum margin of profit, as a proportion to the cost price of the goods transacted, for banks in installment and hire purchase transactions. [/size]Determination of types and the minimum and maximum accounts of commissions for banking services.[size=78%][/size][size=78%]
[/size]Determination of the types, amounts, minimum and maximum bonuses, and the establishment of guidelines for advertisements by banks.[size=78%][/size][size=78%]
[/size]Determination of the minimum and maximum ratio in joint venture, Mudaraba investment, hire purchase, installment transactions, buying or selling on credit, forward deals with respect to various fields of activity; and also fixing the maximum facility that can be granted to each customer.[size=78%]
[/size]So far I have heard nothing about which of these regulatory tools Turkey Central Bank would use. Erdogan just seems to want to lower interest rates without proposing an alternative. I don't think Islamic Central Banking is a problem in itself, many countries have it, but not having a plan for an alternative to interest seems to spell trouble.[size=78%]http://www.islamibankbd.com/abtIBBL/cis_central_banking_in_islamic_framework.php

[JohnF]

Interest rates cut again.

This is what the international credit rating agencies, as published by HDN, think:

Credit agency Fitch lowered its outlook on Turkey to negative from stable last week following the July 15 failed coup attempt, while Moody’s said on July 18 it was putting its Turkey rating under review for a possible downgrade to junk status.

Interestingly, The Daily Sabah made no mention of any negative thoughts in their reporting, simply confirming who is in charge at the TCB:

The CBRT has responded to the government's repeated calls for cheap credit. In late liquidity window interest rates – between 4 p.m. (1300 GMT) and 5 p.m. (1400 GMT) – the borrowing rate was kept flat, and the lending rate was reduced from 10.25 percent to 10 percent.

JF

[Colwyn]

Well, what seems to have happened is that the lira has turned lower against the pound as expected after prices put in a bearish Dark Cloud Cover Candlestick pattern, dropping to a two-week low.  But you knew that anyway, didn't you?

[JohnF]

But you knew that anyway, didn't you?

Of course I did (after five secs with Mr Google)  

JF

[Colwyn]

Today the £ has fallen to a 31 year low against the $. Those charming Brexit people told me this definitely wouldn't happen and anyone who said it would was a member of Project Fear.: the naughty little Brexitliars! The only "good" news is that the TL has done even worse so you'll get more lira to the pound. Not doing me much good at the moment since I am in Euroland.