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Monday, June 9, 2008

Turkey special - EURTRY

The price action is quite obvious and further losses of the TRY should be expected. parallel to the world markets but with an own weak momentum due to political situation the value of the lira should fall to 2,20 with a mandatory drop to 2,10/2. The retracement period is over and strong Turkish Lira policy of the ruling AKP comes to an end. Since it also did not help anyone but the Turkish banks which borrowed in Dollars and lend in TRY to domestic market to make big profits with high interest rates. This weekend a measure which usually occurs ator before elections indicates the ruling party may call for early elections in order to get into the race with a new party name to be ahead of the closure and an erosion in their public support. This will create further instability for a given time. The price action confirms this assumption also from the stockmarket which looks like it has to loose another 10-15% near term. Adding factor is the probable Iran strike since Israel prepares the world for such an event within weeks and on increasing official level. An attack on Iran will have a secondary effect in the middle east since retaliation will be a consequence bringing the whole region into trouble. More money will have to leave Turkey for now even with rising central bank interest rates. It is a very dangerous assumption that a tactical attack of Iran will solve anything but just the fear it will happen will paralize this region and but more negative spin on the weakening Turkish economy. The strength was artificially generated by presenting the numbers in Dollar terms - nobody lives there in Dollar terms and using the statistical strength of the Lira against the Dollar is quite a stretch of reality.

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