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Turkish lira retaining: adhesive plaster that does not cure injured integrity

President Recep Tayyip Erdogan’s savings plan has revived the lira. Turkish currency rose third against the dollar this week, trading at TL12.4 to the greenback Wednesday following idea to reimburse any losses for forex, a plan that some call interest rates all but the name.

This was enough to attract domestic revenue from dollars and gold. Foreign currency will be difficult to win. The immobility, which has disrupted the lira and independent ties for years, does not go away. Many dangers remain; not the president economic beliefs with a central bank that looks good in his pocket. The 5 year high CDS prices show that jitters remain.

Support for the lira has confirmed a significant, cost-effective account – according to Erdogan – $ 165bn in 2018 and 2019. This year saw the end of the warehouse – at least until December. In addition to the major interventions this week, analysts put the month at $ 15bn- $ 17bn.

Chart chart showing depleted bills, total funds and external balances (daily calculations) G2061_21X

Investment has also suffered. Foreign direct investment has been declining in the past few years, further frustrated by the breakdown of the rule of law and the economic downturn as Erdogan sought to strengthen his position due to a terrorist failed to undermine his government. This is living freely with the government purpose receiving a 1.5 per cent share of foreign direct investment by 2023, or almost double the previous year and more than in 2006.

There are a few attractions for foreign investors. Erdogan’s refusal to raise prices – instead of price reductions – is exacerbating inflation. Bond yields and whipping. Risks also target the equity market. Banks, which generally follow monetary policy, face risks of repayment, inflation and financial crisis.

Line chart turkey wild climb on yield curves.  10 years government yield (%) G2061_21X

Some of the ones that have already started to interfere with foreign currency such as BBVA. The price of shares of the Spanish bank has dropped since disclosure to seize to Garanti Bank, which has half, last month. Some take this as a warning to end.

Lex’s team wants to hear more from readers. Please tell us what you think of the financial crisis in Turkey in the comments section below.

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