Currencies: Turkish lira jumps after Erdogan wins in elections

This post was originally published on this site

The Turkish lira jumped as currency markets opened Monday, in the wake of a victory for incumbent President Recep Tayyip Erdogan in Sunday’s presidential and parliamentary elections.

The lira TRYUSD, +1.7911%  rose by as much 3% against the U.S. dollar and TRYEUR, +1.9708%  euro as European trading hours began, to its strongest level in about two weeks. One dollar last bought 4.6043 lira, up 1.6% and one euro bought 5.3555, up 1.7%.

With all but 2% of Turkish ballots counted, Erdogan received 52.5% of the vote, enough to avoid a second runoff election. In addition, Erdogan’s party secured a majority in parliament.

But many analysts suggested that any relief rally for the currency would be short-lived, as investors will now turn to lingering long-term concerns about the Turkish currency.

“In the past, Turkish assets have responded positively to political events that were perceived as increasing political stability,” analysts at Goldman Sachs said in a note before the election.

“However, President Erdogan’s comments on monetary policy during the election campaign—advocating lower interest rates and indicating that he would play a more active role in monetary policy—have raised concerns over the future direction of monetary policy in the event of this outcome,” Goldman said.

Erdogan has described high interest rates as “the mother and father of all evils.” Investors have expressed concern that his preference for lower rates is preventing the country’s central bank from supporting the currency and soothing inflationary pressure.

In the last 10 years, the Turkish currency has lost nearly three quarters of its value against the dollar.

“The recent financial market turmoil means that a sharp slowdown is [in] the cards,” said Jason Tuvey, senior emerging markets economist at Capital Economics. “The risks stemming from the election are more likely to materialize over the longer term—in particular, the risk that an Erdogan-AKP government pursues much looser fiscal and monetary policy.”

A decline in oil prices may have contributed to the recovery of the lira on Monday. The country is a large importer of crude oil, which is denominated in dollars. Brent crude oil LCOQ8, -1.71%  prices fell 1.7% Monday to $74.05 per barrel, following a Russia-backed deal by the oil-exporting nations of OPEC to increase output.

Elsewhere in currency markets there were few large moves, with the ICE U.S. Dollar Index DXY, +0.20%  roughly flat from its level Friday. The dollar fell slightly against the Japanese yen USDJPY, -0.48%  , dropping 0.4% to ¥109.52.

Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.