The Turkish Lira is collapsing, is it a boon for foreign tourists?
The Turkish lira is struggling. Since its major peak in January 2015, to 0.38 Euro, its value has melted two-thirds against the single currency, 0.128 euro, at the time we write these lines. And the debacle has accelerated lately, the Turkish lira having lost 24% over the last five sessions. “This bearish acceleration is linked to the recent battle between Donald Trump and Recep Tayyip Erdogan. The US president doubled tariffs on Turkish steel and aluminum last Friday. Arguing that the continued depreciation of the Turkish lira conferred an unfair advantage on the country’s exports. A shock announcement that made the currency fall. In response, Erdogan urged his fellow citizens to change their foreign currencies – including the dollar and the euro – to support the course of the pound. A call counterproductive however (the pressures have since increased on the pound, Ed), because it has reinforced the fears of international investors, who already feared for several months that the strong man of the country, reelected in June with a power strengthened, does not interfere damagely in the monetary policy of the central bank, “says Laurent Geronimi, director of rate management at Swiss Life Private Banking.
Turkey has been facing headwinds for some time
This unfavorable development comes as Turkey has been facing headwinds for some time. The latter gradually weighed on the pound. “The country suffers from a massive funding gap, equivalent to six percentage points of GDP. Many Turkish companies are financed in dollars and euros, so the significant depreciation of the pound against these two strong currencies mechanically makes it increasingly difficult to repay their loans, especially for companies that sell little internationally. As a result, foreign lenders are increasingly cautious. However, this problem of financing comes as the net increase in commodity prices translates into inflation that affects the purchasing power and consumption of households, thus weighing on growth, “said Laurent Geronimi. This led to a crisis of confidence among international investors, who gradually shed Turkish assets.
“A mistrust that has been exacerbated by the heightened geopolitical tensions between Ankara and Washington. An American pastor suspected of terrorism has been detained in Turkey. While the United States has frozen assets on the US soil of two ministers of the Turkish government,”
said the expert.
A significantly reduced in the prices of hotel rooms and restaurants
While Turkey is definitely going through a bad patch, foreign tourists can have a smile. The persistent weakness of the pound is indeed 88%, over one year. The appreciation of the euro against the currency of the country. Taking into account inflation (+ 15% since June 2017), the purchasing power of tourists has increased by 63% over the period. What to afford a holiday with a note significantly reduced … For accommodation, a night in a mid-range hotel should indeed return to only 15 euros, on average. In Istanbul, a night in a four-star hotel is accessible between 30 and 60 euros. You can even find five stars from 60 euros. As for the catering, count on average three to four euros for a complete meal excluding drinks. If you opt for a fancy restaurant, the bill will only go up to around five euros – and nearly eight in Istanbul. The fall of the pound also lightens the note for entry tickets into the monuments. Count just five euros to visit the Hagia Sophia or the Topkapi Palace.
It is time to pack your bags to visit Turkey
Especially since after a fall as vertical of the currency of the country. The movement of depreciation could now slow down. The dollar – the reference currency – has signed
“an exponential rise against the Turkish lira. With an appreciation of 100% since November 2017 and 500% in 10 years… That being said, the stochastic indicator (tool of the technical analysis, Ed) at 5 months has reached the line of overheating and should slow down the fall of the Turkish lira. Before considering its recovery. In addition, the dollar / pound ratio deviated very significantly (+ 78%) from its linear regression (trend trajectory of the dollar against the Turkish lira, according to a linear relationship) which should also slow down the movement “
says Robert Haddad, president of the Technical Analysis and Trading Training Center.