ALBAWABA – The Turkish Lira dropped to TRY20.10 against the United States (US) dollar Monday, according to Google Finance, in the aftermath of the re-election of current Turkey President Recep Tayyip Erdogan on Sunday.
Bloomberg also reported a 0.5 percent decline in the value of the lira, at 1:55 p.m., Istanbul Time, to TRY20.785. But the New York-based news outlet also reported stocks rising on the promise of “international credibility,” as reported, hinting that Erdogan may be turning away from his ‘unorthodox’ policies.
Wall Street analysts see more weakness ahead, according to Bloomberg, with Morgan Stanley warning it may slide 29 percent, toward 28 per dollar by the end of the year, should Erdogan stay the course.
Wells Fargo & Co. also expects the currency to hit 23 by the end of the quarter.
“An Erdogan win offers no comfort for any foreign investor,” Hasnain Malik told Bloomberg, a strategist at Tellimer in Dubai. “With very high inflation, very low interest rates, and no net foreign reserves, a painful crisis affecting all assets could be on the way.”
Erdogan’s unorthodox approach to interest rates has left markets beholden to an unpredictable mix of ad-hoc regulations and interventions, with new measures introduced informally and on a near-daily basis, according to Bloomberg.
Foreign holdings of Turkish stocks and bonds have declined by about 85 percent, or nearly $130 billion, since 2013.
Traders are more hopeful than ever on the Turkish currency, that market forces will eventually overwhelm government controls, Bloomberg underlined.
The extra cost to protect against lira declines in the coming six months — versus hedging against gains — rose to a record 21.4 percentage points on Monday, doubling from 10.7 in January.
In the equities market, Turkey’s benchmark index BIST-100 rose as much as 4.8 percent on Monday.
The index was trading 3.8 percent higher as of 1:55 p.m., Bloomberg reported.
Companies that bring in hard currency, including glassmaker Sise ve Cam Fabrikalari and national carrier Turkish Airlines, are among the biggest contributors to the advance.
