This is the only point in common between those running foreign currency debt and a group of rentiers and as you know both groups lead very different lives. By the way, there is one more: “Will exchange rates rise further? Who knows? Soon we might see them going up.
A couple of days ago, I posted a joke on social media about this situation. The joke however resulted in me receiving some harsh criticism: “You are the expert! Who else do you want us to ask about that stuff?” they said. I admit that he is not wrong but here’s the thing that bothers me: It’s always the same people who ask such questions whenever exchange rates go up or down. I get such odd messages sometimes that I don’t know how to describe them to you. Here’s an example:
“I sold the dollars entrusted to me at a level of 5.00 TRY to make some profit but TRY/USD still remains high. Do you think will it ever fall?”
I don’t know how to answer this question. What can i say to a person who doesn’t even know that it is unethical to sell the money entrusted to him? Here’s another one:
“In February, I made some euro debt on low interest rate considering exchange rates remained stable for a long time. But then I was hit by a sharp rise. I do not earn foreign currency. What am I supposed to do now?”
“Business people have short memory…”
This question itself readily involves paradoxes. When we look at the basics of things, one can’t help but to think that going into debt despite the fact that you do not have foreign currency income is just a complete lack of foresight. Also, how can you not notice that EUR/TRY did not actually remain stable for too long in February? This means that the person who sent me that message overlooked the fact that EUR/TRY’s ascent from 3.20 to 4.70 between February 2019 and February 2018. A net increase by 46%… He must have been thought that EUR/TRY would not rise any further seeing that the duo had been remaining stable for the last couple of months. We know for a fact that many other firms in history faced the dramatic fate of bankruptcy because they thought “This must be it!”
I should repeat one more time that wondering whether exchange rates will rise or fall is just a waste of your precious time because instead of worrying about the state of things we should be thinking about the reasons (companies’ foreign currency debt stock composition of imports, exports’ low units values per kilogram, high inflation, overall education progress, frequently amended laws, frequent elections, diplomatic conflicts etc.) that led national currency to lose its value.
If you are so curious to learn more about the fate of exchange rates, I strongly suggest you to consult a market. I can’t say they would be very eager to share the correct information with you, but it doesn’t hurt to ask, right?
Here’s a little tip for you: When you notice irrational, absurd movements in markets, try to do the opposite of things (if you have the courage of course. But if you don’t, just stay away). I told you many times what the general trend was even when USD/TRY was 2.00. Turkey has a severe memory problem.