Market News & Analysis

What’s going on with the Turkish Lira?

Mar 29, 2019 | Market Update

High-impact economic news:

07:00 NZD RBNZ Gov Orr Speaks
11:30 AUD Private Sector Credit m/m
20:30 GBP Current Account
20:30 GBP Final GDP q/q
20:30 GBP Net Lending to Individuals m/m
23:30 CAD GDP m/m
23:30 USD Core PCE Price Index m/m
23:30 USD Personal Spending m/m

It’s been a turbulent 24 hours for the Turkish Lira with the exotic currency plunging as much as 5% against the USD on Thursday. Earlier in the week, the Lira reached a 4-week high against the greenback, spiking more than 400 pips over two sessions. The USD/TRY is 3.31% lower for the week, but the USD remains stronger over the long-term. In fact, the yearly chart reveals the USD is an astonishing 40% higher against the Lira.

 

The USD/TRY is no stranger to volatility. In August 2018, the Lira crashed more than 20% in one session amid geopolitical concerns. This week’s volatility is no different.  

Key government elections being held in Turkey this weekend sparked the initial sell-off of the Lira, while pushing the greenback higher. Turkish President Erdogan blamed US investment banks for the slide, after JP Morgan urged investors to sell the Lira amid political uncertainty.

In response to the price plunge, the Turkish government allegedly ordered Turkish national banks to withhold the Lira from the offshore swap market and therefore reduce liquidity. By doing this, the government is attempting to prevent a further fall in the currency. But it hasn’t stopped local investors from shorting the Lira or selling off stocks.

The currency crunch is likely to be temporary and hopefully be lifted by the Turkish government after the local elections take place.

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