If you asked me about the most insane day markets went through over the last 5 years, I would undoubtedly say, “yesterday”. Let’s see retrace our past steps that led us here.
Last week, US Administration imposed sanctions against Turkey’s Ministers of Justice and the Interior and then declared that direct sanctions against Turkey will be on the way. And Turkey, as a response, began to prepare a list of retaliations against U.S. sanctions, thus turning into the biggest conflict that has ever occurred between the two countries. Tensions haven’t heightened this much since when the U.S. fired at the Turkish ship Muavenet or when Turkish soldiers were raided by U.S. forces in Iraq aka the “hood” incident.
I thought to myself, “Would all this be a late retaliation against the Turkish Parliament’s March 1decision to deny the U.S. the use of its territory in Iraq?” It is very well known that Pentagon’s highest-ranking military officers today, were back then among the soldiers who have been deployed on the vessels waiting offshore for orders in Iskenderun. They might be trying to get payback for what happened in the past
Here’s what I understand: many different cells surfaced during Obama’s presidency-due to his lack of authority-are responsible for the 15 July failed coup attempt and many other nefarious incidents. Encouraged by Trump administration’s weaknesses, these cells are capable of making the Government do whatever they want. Ordinary methods may not be enough to fight back against such powerful process.
“Exchange rates will never stabilize unless we achieve peace through diplomacy…”
At every national broadcast program I attended last week, I insistently underlined that Turkey must largely focus on long-term lobbying. Then I added: “USD/TRY would have already hit 5.5. If it doesn’t, it means that people still believe that this insane period of tensions will be over soon” As a matter of fact, dollar was sold at a level of 5.00 TRY for hours. I think investors chose to avoid taking careless actions knowing that Turkey-US ties are founded on a century-old friendship thus common sense will prevail sooner rather than later.
But, yesterday, all hell broke loose and again we are swimming in unfamiliar waters. Exchange rates sharply fluctuate and then calm down. That’s the nature of floating rate regimes. But, it would not very realistic to expect USD/TRY to remain calm for long unless the conflicts are solved through diplomacy.
I warned the officials in Ankara, “We have to mobilize all our forces to prevent Trump from getting re-elected”. It looks like neither presently stabilized interest rates nor possible moderate inflation levels or slightly shrunk current account deficit will not be among Turkey’s top agenda items for quite a while.