Investing in turkish lira

[solic200]

With the tl at an all time low against sterling and turkey in a financial crisis, let alone with the threat of war in Syria, would you still invest in tl with the banks in the trnc or do you think that the banks may be in trouble at a later date with people not being able to afford to pay loans and mortgages etc when interest rates rise.
I really wish I could read into the future but alas I have to ask on a forum

[sophie]

In the short to medium term, I wouldn't invest a kuros more in T.C banks than we have at the moment. Unfortunately Turkish banks are looking a bit flaky as well, but I suspect are safer than TC stand alone banks Its ironical that I read today that Credit West has been awarded an AA+ rating when their loans to locals for mortgages and yet more Mercs etc must be at an all time high.

[JBA]

Sophie - lacking any financial sophistication it seems strange to me that you would consider a Turkish bank before a TRNC bank. TRNC banks are independently insured to the tune of 20,000 euuros per account in the event of collapse. Turkish banks are not insured - which is why Turkish banks give a slightly higher interest rate because they don't have the insurance premiums to pay. If there is any doubt that the banks are sound then I would have thought that the TRNC banks are the ones to choose - what am I not understanding please?

[MVP]

Erdogan has stated Turkey will no longer defend the TL using interest rates but is working through $40bn of foreign currency reserves to defend the lire - $8bn has already been used and the TL has weakened further

Turkey's economic miracle has been funded by low interest loads denominated in foreign currencies - when the TL weakens people struggle to pay the interest which increases, as does the capital amount.

This just stores up a future crisis - I wrongly predicted this would happen a few years ago, but now think the likelihood of a TL collapse followed by a TR/TRNC banking crisis can not be far away.

[cyprusishome]

JBA
Turkish Banks operating in North Cyprus are covered by the same indemnity, they have to comply with the same regulations in order to open here.

As for the 20k indemnity, would you honestly believe that a full pay out would happen in the event of a collapse, the country is bankrupt!!

[belle]

CIS, how right you are, JBA is quite wrong about this one, the Turkish Banks are far safer than the TRNC ones after all this place only survives on Turkish handouts.

[PoshinDevon]

We are travelling out soon, so can anyone advise what the GBP to TL rate is at the moment. Appreciate it changes daily but would be useful to know.

Thanks

[mickhm]

3.18 according to monexchange this morning

[PoshinDevon]

Many thanks for response, appreciated.

[paddywack]

XE quotes 3.20

[guru]

http://www.umitilhan.com/monex/index.asp

[raffs]

Looks like today's announcement by the Fed has pushed the dollar down and helped emerging market currencies recover a little as the possibility of hot money leaving them for the dollar looks less likely for now.

BOTTOM LINE: The FOMC unexpectedly decided not to taper the rate of its asset purchases at today's meeting, preferring to wait for further confirmation of improvement in the outlook. There was no change to the forward guidance on the federal funds rate. The Summary of Economic Projections showed a decline in the central tendency expectation for the year-end 2015 fed funds rate, and the 2016 rate suggested a cautious pace of rate hikes once they begin.

MAIN POINTS:

1. The FOMC unexpectedly decided to leave its monthly rate of asset purchases unchanged for both Treasuries ($45bn) and MBS ($40bn) at today's meeting. The statement noted that "the Committee decided to await more evidence that progress [on improvement in economic activity and labor market conditions] will be sustained before adjusting the pace of its purchases." However, the Committee signaled that reductions in asset purchases are likely in the near term, noting that "in judging when to moderate the pace of asset purchases, the Committee will at its coming meetings assess whether incoming information continues to support the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective." Previously, this language noted that the Committee was prepared to "increase or reduce the pace of asset purchases" and did not refer to "coming meetings."

2. The FOMC did not change its forward guidance on the federal funds rate, retaining the language that the Committee expects to keep rates on hold at least as long as unemployment remains above 6.5% and projected inflation one to two years ahead is not greater than 2.5%.

3. The characterization of economic activity in the statement was slightly more tepid than in the July statement. The statement noted that "some indicators of labor market conditions" have shown further improvement in recent months, slightly more cautious language than used in the last statement. In addition mortgage rates "have risen further," although the Committee retained the language that "the housing sector has been strengthening," despite more mixed recent housing data. The statement explicitly noted that "the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."

4. With regard to participants’ economic projections, the mid-point of the central tendency of the unemployment rate was lowered a touch to 7.2% in 2013Q4 and 6.6% in 2014Q4, while real GDP growth was lowered by 0.3pp to 2.15% at end-2013 and 0.25pp to 3.0% at end-2014.

[How188]

Sorry but I do not understand the last post!!!
Can someone translate into language and none finance person can undersatnd please?

[raffs]

Sorry but I do not understand the last post!!!
Can someone translate into language and none finance person can undersatnd please?

I'll try,

The USA has been printing money (asset purchasing) to the tune of 85 billion dollars a month for the last five years in order to pump money back into their economy and thus stimulate a recovery. However as always the people with the money benefit the most by investing this over supply of money into the American stock market and overseas bonds in particular short loans to emerging economies (Turkey - India etc) because of the higher returns of interest paid. Now most people were expecting the fed to slow down the printing presses which caused these investors to panic and take their money back out from these emerging markets in anticipation. Hence why you witnessed the Rupee and Lira fall last month. It's all a bit like a pyramid scheme if most people are on board then the likely hood is it will keep on going, very much like the London property market. But as people start to bail then values will see realistic levels.

The real outcome was that the fed decided not to reduce on the 85 billion dollar a month asset purchase until their employment rate fell below the 6.5% and inflation did not increase more than 2.5%. Unfortunately I fear the damage had already been done on the speculation part as this tested the various currencies by breaking through support levels not seen before and making investors realise just how precarious things could get. Particularly for Turkey as their debts are very high, together with recent social unrest problems, Syria on the doorstep and European slowdown making this impact heavily on the Lira.

[How188]

In summary do you thin k the lira will go into free-fall or will go down to a realistic level of what??
Is the lira a buy or sell?

[raffs]

In summary do you thin k the lira will go into free-fall or will go down to a realistic level of what??
Is the lira a buy or sell?

Years ago I might have been brave enough to call this but over the last few years most governments have seen to it that we don’t have corrections anymore and will gladly print, QE, asset purchase whatever you want to call it to avoid such a thing. This has been termed “The New Normal ”
I suppose if all nations are busy doing this then equilibrium of sorts can exist until someone does buckle.
On to the Lira. If it keeps falling then Turkey’s inflation will rise (it’s already been talked about being 7% as things stand) this is due to import price increases on oil, food, materials etc. as the lira can’t buy as much. And how do you check inflation, one of the ways would be to increase interest rates but this government is reluctant due to the elections in 2014 for fear of slowing down growth as it will cost more to borrow. Somehow I think they will have to give in and do this around December 2013. This could/might strengthen the Lira, but as I said this is new territory.