People usually ask me whether USD/TRY may fall further whenever the duo tends to drop. The reason why they ask such questions is because they want to know how they should invest their money, not because they are concerned or have debts to pay.
As a matter of fact, we are going through a period where developing country currencies are slowly appreciating against dollar, including TRY of course. Recent efforts to mend ties with the US also contribute. Accordingly, those who were looking for an opportunity to buy currency may soon have to decide what action to take.
Those, who sold their dollars at a level of TRY 4.00 when USD/TRY has first begun ascending sharply, had put some of their money in a short-term deposit. Let’s say they deposited money for one year with around 25% interest rate of today, USD/TRY should remain between 5.25-5.40 to keep those investors from regretting their decision, which seems like a pretty remote possibility.
But things are quite different today for those who had to sell their dollars at above TRY 6. Even with a current deposit interest rate, USD/TRY must hit at least 7.5 after one year to make these investors regret their decision. Well, I think this is an affordable risk. Besides, rentiers would try to minimise exchange rate risk of dollar by increasing revenue using high interest rates anyway since they do not like to tie up money for the long-term especially in the current conjuncture.
Therefore, a lot of people will hesitate to buy or sell as long as USD/TRY keeps falling down. But for those who need to make repayments or pay off debts soon, hesitating would just be a luxury they can’t afford. So, I strongly suggest you to buy small amounts of currency and save it for later.
“Problems for real sector are just only beginning…
Now let’s take a quick look at the real sector: I was in Manisa yesterday to attend a conference on Energy Efficiency on behalf of Altinbas University. Funded by the EU, the conference has welcomed a number of representatives of various corporations and institutions. Here are two exchanges that stood out from the conference: bankruptcy orders made against creditors by even the most powerful business groups in Turkey and companies whose cheques are used by their suppliers or manufacturers to pay off their own debts
As far as I can understand, even the most powerful business groups are struggling with a severe cash scarcity, compelling them to turn to abovementioned types of resorts despite drastically high interest rates. These problems will never go away unless financial institutions quit hesitating to provide funds. So, we should find a way to attract fresh money, sooner rather than later.
