You still ask me about the future of USD/TRY?

Under the pressure of international institutions, it seems clearer than ever that the Central Bank is preparing for a drastic rate hike. Despite this fact, however, the reason why USD/TRY keeps increasing is obvious: Given the fact that making preparations for a drastic action, yet deciding not to go with it at the last minute has become a bit of a habit with the CBRT, investors naturally choose to secure their positions with this old proverb in their minds, “The mountain will bring forth a mouse again”.

Yesterday, I had the chance to chat with an investor who has sold his dollars for around 4, 00 TRY. He said, “I had to take the leap. Although I was so anxious about it, I bought dollars last week. You know what? I’m glad I did”. After all, it is not an easy decision to make. Only highly experienced investors may find themselves in situations where they have to make hard decisions. And they do it based on the causes of market formations, not by focusing solely on technical or basic analysis.

First of all, neither a high possibility for a second round in presidential elections nor a potential disturbance in parliamentary arithmetic no longer seem as the causes of market disruption. Investors now seem to think that no matter who wins the elections, it would lead to another risk. Therefore, opinion polling for the upcoming elections only helps a bunch of people have their fun and make the leaders more stressful than ever.

“Risk is unavoidable, no matter who wins…”

To be more precise: As foreign investors still haven’t witnessed the opposition present a strong economic program, they do consider the presidential election going to a second round a very low probability, yet a high risk. It is considered that a number of constitutional institutions, notably the parliament, will have to face functional problems in case an opposition candidate takes office as president.

On the other hand, in the event that Erdoğan is elected president, the possibility of all negative projections regarding the Turkish economy become true is considered a huge risk factor. People are really afraid that Ankara’s approach towards many problems, including current account deficit, high exchange rates and interest rates, may not simply be electioneering. Even some say, “If their election promises become a reality, Turkey will just have to isolate itself from the real world”.

Call it exaggeration or paranoia, seeing the way that investors perceive the upcoming elections, I think there’s no need to look for the reason behind USD/TRY’s rise or ask, “How high will it go?”; because, it will go higher and higher until investors see a significant decline in investment risks.