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Turkish Lira – The Bulls Have The Upper Hand

By Michael DylanForexMar 16, 2016 06:32AM ET
www.investing.com/analysis/turkish-lira-%E2%80%93-the-bulls-have-the-upper-hand-200121765
Turkish Lira – The Bulls Have The Upper Hand
By Michael Dylan   |  Mar 16, 2016 06:32AM ET
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From a fundamental and technical perspective, USD/TRY or EUR/TRY is a long-term buy. Any strengthening of Turkish lira should be temporary.

The Turkish lira lost 65.0% against the dollar since the beginning of 2013, and there is no end in sight as the Turkish economy has entered into a downward spiral.

USD/TRY Daily Chart
USD/TRY Daily Chart

The Turkish economy runs on credits and debts, and millions cannot pay their debt and credit card debts. Also, the total foreign debt of corporations and government is around $405 billion. As the dollar or euro rises against the Turkish lira paying the debt becomes more expensive. A corporation has to earn a greater net profit in Turkish lira, and then pay the loan it borrowed at $2.30 with $2.90. That is one reason why thousands of companies are shutting down. The result is more unemployment and less tax base for the government. The government of Turkey has imposed across the board tax/fee increase of about 8% in January 2016, which should further exasperate the economic problems as less cash flow tends to cause a decline in an economy.

Recently Standard & Poor’s and Moody’s gave a negative rating for Turkey, adding further reasons to increase the interest rates, which reduced the number of people who can qualify to buy a new home. One of the leading economic engines for Turkey has been the building sector.

As the outlook for Turkey becomes more negative there is a net outflow of cash from Turkey. According to IMF, Turkey was in the no. 2 spot behind China for risk threats of increasing company debts.

Turkish Lira – The Bulls Have The Upper Hand
 

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Turkish Lira – The Bulls Have The Upper Hand

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