Measures to enable exchange rates, in other words, Turkish lira to regain stability, must be shaped in a way not to confuse investors, not to go against the realities of our world and give the impression that Turkey is wasting its resources. If Turkey were able to do all that without resorting to a rate hike, we would not have paid such a huge price.
At this stage, some people may still expect TRY to continue to gain value. As a matter of fact, it is possible to create a process where Turkish lira will depreciate even though it will not increase in value. For example, USD/TRY has reached a level of 3.00 before November 2015 elections, then it remained almost stable until October 2016 despite the new OM taking office and the failed nefarious coup attempt of July 15. Therefore, a positive turn of the tide following the elections may result in a similar journey of the USD/TRY.
As a matter of fact, the duo remained within a triangle of 3.80-3.50-3.90 very recently, during January-November 2017 to be exact. So, we may expect it to hit 4.50, 4.25 and 4.50 respectively and stand at these levels for a very long time. Not a remote possibility… As long as the economy administration avoids delivering statements that worries investors.
Exchange rates may be expected to remain within a narrow band for a long time, if a successful coordination can be established between the Prime Minister’s Office and Parliamentary Arithmetic and the economy administration is left to the care of trusted, strong-willed officials after the elections. However, this does not mean that the rise of USD/TRY will be over; because, it unfortunately will not.
Turkey’s economic fragilities with regard to current account deficit, external debt and other macroeconomic issues are showing us that the exchange rates may climb up again anytime. Therefore, Turkey must achieve a simultaneous stability of in political, social and economic matters.
I will relentlessly stay persistent in pointing out the truth.