Turkish lira - Over 4.5% Down

[ElectricianPete]

ISTANBUL (Reuters) - The Turkish lira hit a record low in weekend-thinned trade on Sunday, after the governing AK Party failed to win an outright majority in a parliamentary election, unsettling investors with the prospect of a minority or coalition government.

Investors had been hoping the AKP would squeak out enough votes to remain in power as a single party and avoid the uncertainty and gridlock of coalition politics.

But with more than 96 percent of ballots counted, the AKP had taken 40.9 percent of the vote, according to broadcaster CNN Turk, a result likely to leave it struggling to form a stable government for the first time since it came to power more than a decade ago.

"The loss of the AKP's 13-year-long single-party parliamentary majority in today's Turkish election represents one of the most dramatic political developments in emerging markets in recent years," said Nicholas Spiro of Spiro Sovereign Strategy.

"The lira was falling sharply against the dollar before the election. It could now plummet, fuelling inflationary pressures further and heaping pressure on the central bank to raise interest rates."

Already one of the worst performing emerging market currencies this year, the lira initially weakened as far as 2.799 to the dollar in thin trade after the results, an almost 5 percent slide.

By 2040 GMT, it was at 2.759 to the dollar, still considerably weaker than Friday's close of 2.6615.

"ERDOGAN MAY DOUBLE DOWN"

A senior AKP official told Reuters on condition of anonymity that the party now expected to form a minority government, and to contest an early election at some point.

While investors were hoping for an outcome that ensured stability, most hoped there would be no landslide for the AKP, because it could have led to a constitutional change and handed more power to President Tayyip Erdogan, increasingly seen by critics as an authoritarian figure.

Some analysts said Sunday's setback could inflame Erdogan's authoritarian tendencies.

"Erdogan is unlikely to alter his overall stance, governing style and policy agenda," said Wolfango Piccoli of Teneo Intelligence.

"The risk is that he may double down, feeling under pressure. Erdogan's authoritarian brand of politics will remain polarizing, and tensions within the country will continue to run high as long as he is in office."

Erdogan has railed against high interest rates, increasing concern about political meddling in monetary policy and putting pressure on the lira. The currency is down more than 15 percent this year, according to Thomson Reuters data; only the Ukrainian hryvnia and the Brazilian real have fallen more.

Some investors welcomed the result, however.

"Turkey's voters have decided to form a parliament with four parties," said Guler Sabanci, chairwoman of Sabanci Holding, one of Turkey's best known conglomerates.

"This is an important step for democracy, taken in the direction of peace and reconciliation."

[TRNCVaughan]

http://www.xe.com/currencycharts/?from= ... Y&view=12h
£1 = 4.28tl and climbing.
Makes you realise how cheap it is to live here if you have Sterling pension(s).

[White Lily]

But wait for the prices to go up accordingly...

[TRNCVaughan]

I buy mainly local and Turkish produce and haven't noticed yet.

[Groucho]

Political instability following an inconclusive election will always worry the markets (they love it really!).

The Turkish bank has reduced rates on foreign currency accounts in an attempt to force money into Lira accounts... we'll see.

Expats with incomes in £Sterling will be fine but the locals... who knows.

[CatalkoyChris]

Well, its market forces really. If the local population can't afford to buy food etc the price rises should slow.

But, yes for people with stirling - living is mostly cheap over there

[rocking]

2.30 p.m. Was 4.18 tl. £1 whilst waiting went down to 4.1.

[TRNCVaughan]

Just got 4.21tl for a pound at the exchange shop in Alsancak.

[Owl Lady]

All this doom and gloom and there is SOD ALL any of us can do So for God's sake just enjoy the sunshine!!!!!!!!!!!!!

[TRNCVaughan]

All this doom and gloom and there is SOD ALL any of us can do So for God's sake just enjoy the sunshine!!!!!!!!!!!!!

What doom and gloom?
My income is 95% sterling in the form of UK state and occupational pensions.

[Owl Lady]

Not me with the doom and gloom. I am 100% happy here warts and all, and would not live anywhere else!!!

[TRNCVaughan]

http://www.xe.com/currencycharts/?from= ... RY&view=5Y

In 5 years we have seen the exchange rate go from £1 = 2.22tl to £1 = 4.26tl, almost double. In this time we have not seen a corresponding cost of living increase.

We can only imagine what will happen to the Lira in the next few weeks.

[mikelapta]

Yıppee.UK Pension Day Tuesday !!!! Shall İ book Securicor to take me?

[fatouche]

Not funny for those who earn salaries in Lira and pay rent in sterling.

[terry2366]

It's a country that uses lira why should the rents and prices of cars be allowed to be in sterling?????? It's like living in the UK and paying in yen.

[fatouche]

I couldn't agree more, but that doesn't help the current situation.

[Keithcaley]

It's a country that uses lira why should the rents and prices of cars be allowed to be in sterling?????? It's like living in the UK and paying in yen.

Sterling is a stable currency, unlike the Turkish Lira, Landlords and car dealers choose to quote, and to be paid in that currency.

In any country in the World, you can choose to quote a price in any currency that you like - there aren't any laws to stop you!

Actually, when I worked in the UK, our Japanese Parent Company used to ship us stuff, priced in US Dollars, not Yen! - Work that one out...

[waddo]

As long as I can remember out here, all computer bits have been priced in US Dollars because that is what the seller has to pay for them in to start with! We based being able to live on our pensions here on the exchange rate of 2.6 to the £ and when it dropped to 2.21 nobody really cared that it was hard for some people and easier for others, now it is the other way around it is still hard for some people but easier for others. The only thing that appears to have changed is the make up of the groups of people the exchange rate effects.

However, being one of those who have weathered the storms of previous years I can still feel for those who are now faced with the storm front. It has to end somewhere and I can only hope that it ends well for all.

[David]

Just have to tough it out untill the economy gets better and the Lira strengthens

[waddo]

"IF" - Today's rates (XE.COM) gave me this: Pound to Lira = 4.27, Pound to Euro = 1.38 and Euro to Lira = 3.08. Now I am not a financially clever guy but I can count. IF the current peace talks succeed and we are all (the whole Island) fully entered into the EU, IF the new part of Cyprus (The federated KKTC) also changes across to the Euro to keep life simple across the Island and for foreign trade purposes. Do you think that prices - currently in Lira - will be adjusted to reflect the same price in Euro's? I.E. the current minimum wage in the TRNC is I understand is set at 1650 Lira or 534 Euro's, the current minimum wage in the Republic of Cyprus (RoC) is set at 924 Euro's, almost double the minimum wage of the TRNC. So IF the North went to the Euro and brought the minimum wage in line with the RoC - thereby allowing all prices in the shops to remain the same as they are currently - would that indicate a true Lira exchange rate of around 2.17 Lira to the Pound. Would we then return to the days of 2007 and be all back to scratching around for a living again?

Remember it is all just IF!!!! But it is interesting times we live in.

[mikelapta]

Well today got nearly 300Tl more on my UK pension than last month.Wow that's 60 more items to buy at Mr.Pound !!!!

[waddo]

Interestingly, with the exchange rate going the way it is, Mr Pound will soon be exactly that - sudden turn up for the books that will be - lol. Wish I had your pension!!

[elizabeth]

While those of us who get pensions in Sterling may be doing well at the moment I do think we ought to spare a thought for those who are paid in TL and have to pay rent/loans in Sterling, I personally don't think anyone should be gloating about it.

[Hedge-fund]

"IF" - Today's rates (XE.COM) gave me this: Pound to Lira = 4.27, Pound to Euro = 1.38 and Euro to Lira = 3.08. Now I am not a financially clever guy but I can count. IF the current peace talks succeed and we are all (the whole Island) fully entered into the EU, IF the new part of Cyprus (The federated KKTC) also changes across to the Euro to keep life simple across the Island and for foreign trade purposes. Do you think that prices - currently in Lira - will be adjusted to reflect the same price in Euro's? I.E. the current minimum wage in the TRNC is I understand is set at 1650 Lira or 534 Euro's, the current minimum wage in the Republic of Cyprus (RoC) is set at 924 Euro's, almost double the minimum wage of the TRNC. So IF the North went to the Euro and brought the minimum wage in line with the RoC - thereby allowing all prices in the shops to remain the same as they are currently - would that indicate a true Lira exchange rate of around 2.17 Lira to the Pound. Would we then return to the days of 2007 and be all back to scratching around for a living again?

Remember it is all just IF!!!! But it is interesting times we live in.

Interesting indeed.

The TRNC banks would be integrated into the RoC monetary and banking system. The TRNC banks are insolvent in that they could never afford to pay out what is held in deposits so Turkey would have to guarantee all balances for a given period (3 months). Having said that the RoC banks are bust too so the ECB & EU would have to be very active . In the light of having their fingers burned in Greece at present the appetite for backstopping an unreliable economy may be lacking. However the relative size of Cyprus is in its favour so with loans/aid/guarantees etc it could be done.

All goods would be priced in lira and euros for a year or two and then the lira use discontinued. There would besome capital flight as ill gotten gains stashed in TRNC banks would be moved.

Labour is cheaper in the north due to mainland turks and lax employment protection. A lot will depend on what a settlement plan has in mind for the turkish settlers but evidence from the East/West German reunification suggest there will be wage disparity for some time but based on geograpical factors rather than political - as the infrastructure catches up in the north so the wage gap will narrow.

[David]

But what happens when Greece is allowed to default on its bailout loans and leaves the Euro and goes back to the Drachma as looks more than likely.

[tomsteel]

David, are you sure Greece's exit would take the RoC with it?

[Hedge-fund]

But what happens when Greece is allowed to default on its bailout loans and leaves the Euro and goes back to the Drachma as looks more than likely.

They won't be allowed to default - they would just default.

All bets are off. Many commentators say different things but as this is unprecedented (a "developed" economy defaulting on imf) it's impossible. No-one over the last 5 years has contemplated a grexit so they have been lending it vast sums of money - EZ taxpayers money. If Greece simply walks away from the debt the repercussions will be felt seriously around the EZ institutions and the imf. More recession and a stagnation in growth/trade.

For Greece, their banks would probably close for a protracted period of time. When they reopen the monies held would be denominated in drachma (this is why over €500m euros have been pulled this year alone). To pay their immediate pension/wages etc the government would have to print drachma like mad and this would weaken the currency - inflation would rocket. There is a plus side..........after a short period of time it would stabilise, growth would come back and tourism boom.


The issue has been fudged for so long by weak Greek politicians no matter if you agree with Tsipras' politics you have to say he has not (thus far) backed down.

[sophie]

"im in doors, went on to a Foreign xchange forecast this a.m for the Lira in 3 months time. 4.71 to 5.2? = 1GBP Bearing in mind, it was just an educated guess really. That's all forecasting is, isn't it?

[Hedge-fund]

David, are you sure Greece's exit would take the RoC with it?

Within the last 5 minutes it's been announced that RoC has qualified to receive its next tranche of bailout funds.

The troika is happy with what RoC has done and is doing.

Cyprus' banks collapsed due to, among many other things, its links to Greece's monetary and banking system. These links have now been broken and RoC can stand alone if Greece pushes the armageddon button.

[Hedge-fund]

"im in doors, went on to a Foreign xchange forecast this a.m for the Lira in 3 months time. 4.71 to 5.2? = 1GBP Bearing in mind, it was just an educated guess really. That's all forecasting is, isn't it?

It's all dependent on internal politics at present.

[TRNCVaughan]

http://www.ratesfx.com/predictions/pred-try.html

[TRNCVaughan]

Well today got nearly 300Tl more on my UK pension than last month.Wow that's 60 more items to buy at Mr.Pound !!!!

Me too. Converting into beer tokens.

[TRNCVaughan]

http://www.xe.com/currencycharts/?from= ... Y&view=12h
4.30tl now.