Turkish Lira in Focus ahead of Upcoming Week

The Turkish Lira plunged as much as 5 per cent on Friday, its biggest fall since October 2008  in a dramatic sell-off as reports of coup attempt by Turkish military came to action. Uncertainty on Friday night sparked a ‘risk on’ sentiment in markets.

The Turkish Lira closed Friday’s drop-off, trading at 3.0172 against US Dollar, 5% higher than its previous closing(2.878) and 3.3095 against Euro. The iShares MSCI Turkey ETF lost 2.5 percent closing at $41.60.

The coup attempt failed as reports on Saturday released that Erdogan’s regime appears to demolish military force attacks.
[wibbitz]b4f8db1f0ebea43f19f1060c15dd54f14[/wibbitz]
Forecast for next week could imply that Turkish Lira and Turkish shares market should bounce back close to their previous levels as Erdogan’s regime succeed to get power over the coup attempt.

However, instability will continue in and out of Turkey. The international community will accept Erdoğan as an autocrat holding chaos for now , but in the long term Erdogan’s authoritarianism regime might not be acceptable by international community.

Therefore, Turkish economy will continue to suffer and further depreciation of TRY (Turkish Lira) is to be expected. Turkey might see its credit ratings downgraded. The current ratings are: S&P – BB+ (stable), Moody’s – Baa3 (negative), Fitch BBB- (stable).

The dramatic coup attempt in Turkey also pushed oil prices higher due to Turkey strategic position and political significant in Oil market. Brent crude was last up 1.86 percent, at $48.25 a barrel after settling up 0.5 percent closing at $47.61.U.S. crude was last up 0.59 percent, at $46.28 per barrel after settling up 0.6 percent, at $45.95.

Going forward, stability is the main key for Turkey. The Turkish economy needs capital inflows from abroad and foreign investors need confident in Turkey political stability, otherwise they might withdraw their capital.