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Investment: TL is the currency that lost the most value in emerging markets

Testing the USD / TL limit of 8.20 at 18:30, sales are observed in all Emerging Markets (GOP, Countries = GOU). While the benchmark 10-year bond yield for the world in the US increased to 1.68%, the dollar index is still below 93. However, the dollar is strengthening against the euro and to the JYen. In Turkey, the emergence of high inflation figures in March, the return of the Cabinet Berat Albayrak and it will take 2-3 weeks of curfew across the country during Ramadan have a price.

Investment writer Necdet Erginson commented on the progress at GOU FX today:

The dollar indicator, which revived last week, started the new week with optimism. While the US dollar index continues to rise to 93.0 today, developing country currencies are experiencing a limited decline against the dollar.

At the last hour of the first trading day of the week, the greatest loss of the currencies of developing countries is experienced in lira and Mexican pesos. The lira and the peso lost more than 1%, while the Polish zloty and the South African rand follow the ranking, with less than 1%.

The uncertainties about monetary policy have a big impact on the fall of the Turkish lira after the loss of 10% last week. Statements by CBRT Governor Kavcıoğlu that there will be no immediate rate cut in April raised expectations of a rate cut in the following months. On the other hand, financially, credit expansion and the KanalIstanbul project are believed to prevent savings.

The movement of the dollar in global markets was slightly positive today, while the TL continued to depreciate due to national developments, so the exchange rate rose above 8.20. Therefore, it erased its post-November losses. The Turkish lira fell more than 1% against the yen and yen, while the Turkish lira fell more against the New Zealand dollar in emerging market currencies today.

COMMENT: Do residents buy foreign currency?

Since the morning, we have heard the statement by Professor Şahap Kavcıoğlu that the interest rate cut is not safe, and then the statement by the adviser to the presidency, Cemil Ertem, that capital controls are definitely not on the agenda. . The President of Parliament, Şentop, also clarified the question of whether to leave Montreux and stated that he did not have a statement to that effect.

Despite all this, it is possible to assess the depreciation of the Turkish lira as a result of foreign sales and foreign currency purchases by panicky residents.

According to Foreks, the March CPI will be around 1.05%, but it is possible that the opportunists have made a rise and a higher CPI after the rapid devaluation of recent weeks. The CPI, which exceeds 1% per month, means that the deposit rates in TL turn negative in real terms. The return of withholding tax on deposits at the end of March was also raised as concern.

However, the main problems are on the political front. The return of Berat Albayrak to the cabinet will send a message to foreign investors that President Erdogan has completely renounced traditional economic policies.

The massive curfew that will last 2-3 weeks in Ramadan is not important for the markets at the moment, but it poses a serious threat of stagnation in terms of the economy. The onset of a new depression in the economy can exacerbate budget deficits by increasing spending on social security, as well as causing chain bankruptcies and a new wave of unemployment.

The government is not trying to appease the market by selling foreign exchange through exchange bans and public banks, which is admirable. However, we are very close to a vicious cycle in the foreign exchange market. If residents continue their purchases, companies with imminent foreign currency debt may buy on the spot market.

Erdogan’s candid remarks about interest rates and the appointment of Naci Ağbal to a cabinet position in charge of the economy may ease concerns.

Unfortunately, although the political mistakes are offset, the chaos in the Republican Party prevents fresh money from entering the system in the short term.

As a technical analysis, we obtained the support and resistance levels from InvestAZ:

The dollar indicator, which revived last week, started the new week with optimism. While the US dollar index continues to rise to 93.0 today, developing country currencies are experiencing a limited decline against the dollar.

At the last hour of the first trading day of the week, the greatest loss of the currencies of developing countries is experienced in lira and Mexican pesos. The lira and the peso lost more than 1%, while the Polish zloty and the South African rand follow the ranking, with less than 1%.

The uncertainties about monetary policy have a big impact on the fall of the Turkish lira after the loss of 10% last week. Statements by CBRT Governor Kavcıoğlu that there will be no immediate rate cut in April raised expectations of a rate cut in the following months. On the other hand, financially, credit expansion and the KanalIstanbul project are believed to prevent savings.

The movement of the dollar in global markets was slightly positive today, while the TL continued to depreciate due to national developments, so the exchange rate rose above 8.20. Therefore, it erased its post-November losses. The Turkish lira fell more than 1% against the yen and the yen, while the Turkish lira fell more against the New Zealand dollar in emerging market currencies today.

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