I must say that what has been going on lately is not natural at all and cannot be explained on the basis of market mentality.
Yesterday, markets were thrown into turmoil simultaneously in Russia, Turkey and Iran. The fact that the leaders of these three countries had convened last week did bother a number of western countries, including the US. Not to mention of course the Nuclear Cooperation agreement signed between Turkey and Russia the day before the Russia-Turkey-Iran summit.
I usually don’t pay attention to conspiracy theories. I prefer to look into as many details as possible, rather than just taking a glance at things. As a matter of fact, there was nothing out of the ordinary to report about the market trends until 3.30 PM, except maybe for a “general negative trend”. After 3.30 PM, however, things started to get out of control, not just in Turkey too.
Similarly in Russia and Iran, national currencies went into sharp decline. Harsh sales waves swept the markets. I want to make clear that there’s no way financial institutions trading USD/TRY above 4, 10 level did all of this on the basis of economic logic. They either don’t know what they’re doing, they are trying to fulfil some customers’ requests or there are some strange things going on.
“There is no such thing as coincidence…”
I hope I won’t offend anyone with the things I’m about to say. I have nothing to say about transactions carried out to meet critical needs. However, markets are not a toy. It doesn’t sound very realistic to me to call all those transactions “panic buys”. If there’s a buyer, there’s a seller too. Who is doing this?
I need to remind you of two very important features of floating exchange rate: buying declines when exchange rates increase too quickly. Also, you need money to buy foreign currency.
Such details raise more questions in my mind. It is an undeniable fact that our national currency is under risk because of Turkey’s economic fragilities. Nevertheless, economic parameters alone do not seem enough to explain why financial markets in three different countries were simultaneously upside down yesterday.
I am going to share the details with you after taking a deeper look into markets today.