Turkey’s Lira Sees Longest Run of Weekly Losses Since 1999

A Sign of Change in Turkey’s Economic Approach

The Turkish lira is on track for its longest weekly losing streak since 1999. Turkey’s recent economic team, spearheaded by two ex-Wall Street bankers, has adopted a restrained approach towards intervening in the foreign exchange market.. In the 18 months leading up to President Recep Tayyip Erdogan’s re-election, the central bank spent nearly $200 billion on foreign exchange reserves in an unsuccessful attempt to strengthen the currency. However, The selection of two individuals with strong financial acumen signifies a shift in the free market’s approach to establishing the fair value of the Lira. Foreign investors seem to like what they see.

• What Forex Traders Need to Know

  Last week, foreign investment rose for the first time since December 2017, with central bank figures showing $287 million in Turkish bonds and stocks were purchased. Many foreign investors expect capital inflows to continue to increase as the lira reaches equilibrium. The Turkish government’s support for free markets rather than continued intervention could also attract further foreign investment. What does this mean for Forex traders? Investors, new or new, should pay attention to currencies that are subject to targeted government intervention.

• Trade Tariffs and Currency Risks
  
  While countries like Turkey are moving towards free market policies, other countries like China are also stepping up interventions to offset the impact of trade tariffs. Traders should be cautious when considering investment options in currencies that may be at high risk of intervention. For example, a country may try to support its currency by buying large amounts of it in the foreign exchange market. Government intervention can affect the accuracy of the foreign exchange market and cause potential difficulties for traders. With this in mind, traders should proceed with caution.
  
  

• How to Stay Cautious in a Volatile Market

  It is tempting to time the market and trade on the movements caused by the intervention. However, the situation may worsen without notice. Sudden changes in government policy can significantly impact the stability of a currency’s value. Smart investors should also be wary of overconfidence that can creep into periods of stability/optimism. Blind faith in a government’s ability to maintain currency stability can easily lead to losses. Remaining cautious and trading wisely is the key to protecting your investment.

• Evaluating the Impact on Bonds, Stocks, and Foreign Investments

  Conclusion: Although the Turkish lira recorded weekly declines, with two financial experts at the helm of the economy, the country has entered a new phase where strong government intervention is no longer the order of the day. It’s coming. For investors, now is a great time to focus on the lira and the Turkish economy and assess the implications for foreign investments, bonds and stocks. A shift to free market policies could benefit investors and traders if the economy and investor sentiment remain stable. However, foreign exchange traders should be aware of the possibility of political instability or changes in government policy that could adversely affect the Lira and trading in general.