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Turkish Lira rallies into second quarter 2014

As we predicted in our article dated 28 January 2014 announcing Turkish Central bank 5% interest rate hike, Turkish Lira has now started its rally up against USD, Euro and GBP.  We had been advising our readers since late 2013 to take the opportunity and invest in Turkish real estate as Turkish Lira continued to plummet among a backdrop of political confrontations and the effects of US tapering of its quantitative ease policy, which adversely affected all emerging market currencies.  

Turkish Lira vs USD 9 March - 8 April 2014We had predicted that the window of opportunity for best deals to be had in Turkey due to sliding currency would be open until early May 2014 and then Turkish Lira would start reversing and picking up against hard currencies from early second quarter 2014.

Our predictions were spot on. Following the local elections held on 30 March 2014, where Erdogan's ruling AK Party announced victory with some 46% majority, Turkish Lira started reversing again. Coupled with some very strong economic indicators published by the government at the end of first quarter of 2014, showing exports up year on year, forex reserves increased and employment figures exceeding targets, Turkish Lira started its climb.
  
From 9 March to 8 April 2014, the Lira regained 8% against USD from 2.25 to Dollar to 2.09.  Similarly. Lira has recorded gains against both Euro and GBP over the same period.  

Immediately after local elections, the Lira jumped to a 3-month high against USD. The election results are viewed by international money markets as continued stability and economic advancement.

Political confrontations experienced in Turkey since 17 December with the launch of corruption allegations by a leading high court into the affairs of several MP's within AK Party had hit the Lira on the head and accelerated its slide. Then came the 5% interest rate hike by the Turkish central bank on 27 January to help rescue the Lira. That helped, however, the political questions remained in the back-drop. Could Erdogan's AK Party still salvage the general elections to be held next year or has the opposition gathered too big a support that continuation of single party rule is being compromised. What will happen to Turkish economy if Erdogan loses grip over his people and party. All these questions inevitably caused a sense of concern in the international markets. However, it appears that the decisive win at local elections, which acted as a barometer of Turkish general public, helped spell those concerns setting the tone for a strong economy to continue well into 2014, 2015 and beyond.  
 
We predict that Turkish Lira will continue to strengthen against USD from its current level of 1 USD to 2.09 TRY. Our prediction is that TRY will come fractionally below 2.0 level by June 2014, GBP will fall to 3.2 (as of 8 April 3.5) and Euro will fall to 2.55 (currently 2.89).  In other words, we expect Lira to pick around 8-10% further against hard currencies.  Added to some 8% already gained, Lira should recuperate almost 20% almost back to its position before June 2013. Although this is great news for those with Turkish Lira deposits (currently paying handsome interest), it may not be so for those looking for property deals in Turkey.  As the Lira strengthens, our ability to negotiate in real terms diminishes.  

If you are planning to purchase real estate in Turkey but have not quite made up your minds as to when, we suggest you pull your plans sharply forward to before June 2014 for the difference could be in thousands of Euros to your favour.  For help and guidance, call us now.

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