First, let’s see what exactly happened yesterday and try to figure what was the meaning of it all:
- The United States and Turkey have agreed on removing some PYD groups out of the specific regions in Syria
- Trump has announced via Twitter that he fired Tillerson as secretary of state and Steve Goldstein as undersecretary of public affairs
- The latter led to a rise in Euro/Dollar parity
- Euro/TRY and USD/TRY parities in Turkey, they both climbed up. Currency basket has hit record high.
- Treasury got into a 5-year debt of TRY2.7 billion. Interest rates went above 13%.
- Likewise, benchmark rate touched 13.75%.
Now, let’s review one by one these seemingly solitary developments: The fact that Trump fired secretary of state, even without speaking to him, and the undersecretary of public affairs right after America and Turkey agreed upon removing PYD groups out of the region, resulted in negative feedback, including negative impacts on Dollar’s global trend and on current economic environment in Turkey.
Euro broke an appreciation record against Turkish lira in Turkey as it also appreciated against the US dollar globally. But, this sudden rise in Euro/TRY parity caused USD/TRY to turn upward either. As for the currency basket, it hit new record highs by making the last record fade into history. Consequently, investors were pretty uneasy about this situation which has revealed the hot demand for foreign currency.
“Construction and labour-intensive industries have no appeal anymore…”
In the meantime, Treasury has quietly got into a huge debt. A 5-year T-Note sale in exchange for 2.7 billion Turkish liras… And the annual compound interest realized above 13%, showing that the Treasury will continue to pay off high interest debts for the next 5 years. But, in my estimation, level of interest rates will be much higher than from one year to the next.
Rise in benchmark rate is not a good omen either. It’s a clear indication of how uneasy the investors actually are. We must admit that Turkey’s economic fragilities have become extremely obvious. Bold statements are not reciprocated anymore.
For the last two years, I’ve been telling that Turkey must devise a brand new story for itself. But stories Turkey can offer involve nothing but construction/contracting sector and labour-intensive industries. And let’s admit it; they do not appeal to anyone anymore. As the world is about to enter a new era of strong winds, I’d like to repeat once again that Turkey must absolutely come up with a brand new story!