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Turkish Lira Carry Trade
- Thread starter DannyBly1
- Start date
I would not recommend it, too much risk at these levels..Quote from DannyBly1:
I'm looking at the sizeable 12% interest rate differential on the USD/TRY currency pair.
I'm thinking this might be a good time to look to position myself short in the USD/TRY to participate in Turkey's economic development over the next year or so -
Quote from riskfreetrading:
That is not a devaluation! devaluation have an exact meaning. Use the same word for other securities and you willsee what happens to you on ET and everywhere else.
I'm not saying that's textbook "devaulation". I'm saying that's what he meant.
What is wrong with you?
Quote from Ivanovich:
I'm not saying that's textbook "devaulation". I'm saying that's what he meant.
What is wrong with you?
Do you want me to use a street definition? I read words and check their definition in dictionaries. Plus, how do you know that this is what he meant? After his first post he gave links in which I read this definition of devaluation:
"In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency"
The quote was exactly what I understood from his first post. Why anyone would blame me for correctly understanding the word even by his own links? This is beyond rational thinking.
So I send you back your own question: "What is wrong with you?" in not working with established definitions of words.
Of course any currency (lira and others included) are risky, and I was not commenting about loss in price due to market forces. That is natural in a free market, and is the core force that makes a market work and lead to price dynamics/discovery.
"specifically implies" is an oxymoron if we are getting technical with the definitions of words. and I must be a terrorist because I made money shorting the USD today and I think anything American can will be worth less if the Fed keeps printing money and inflation gets out of control. "Free markets" are a loosely defined term especially regarding currencies in the last century and recently in the case of Northern Rock. The value of any fiat currency is subject to the whim of its central bank and government. And in the context of devaluation and inflation, the Turkish Central Bank has not historically been a model of low inflation. Chill out a bit though, man, its not healthy to get so worked up about stuff.Quote from riskfreetrading:
Do you want me to use a street definition? I read words and check their definition in dictionaries. Plus, how do you know that this is what he meant? After his first post he gave links in which I read this definition of devaluation:
"In common modern usage, it specifically implies an official lowering of the value of a country's currency within a fixed exchange rate system, by which the monetary authority formally sets a new fixed rate with respect to a foreign reference currency"
The quote was exactly what I understood from his first post. Why anyone would blame me for correctly understanding the word even by his own links? This is beyond rational thinking.
So I send you back your own question: "What is wrong with you?" in not working with established definitions of words.
Of course any currency (lira and others included) are risky, and I was not commenting about loss in price due to market forces. That is natural in a free market, and is the core force that makes a market work and lead to price dynamics/discovery.
TRY is overbought and overvalued. Technically and fundamentally, the lira is in a position to correct at least 5-8% in the coming months.
Obviously many funds are running a carry trade, and so I have read that a carry trade can enforce stability of a currency on occasion, thus limiting the risk to devaluations that can occur.
I have the paper that describes this carry trade stability thing, but in the case of Turkey, fundamentally, when Ms. Sabanci says its overvalued, its overvalued.
The Sabanci's need a low currency to sell their goods at reasonable prices to europeans. This is coming under pressure. Export problems aside I am a bull on Turkeys economic growth and lived there in 1999, and know how the country operates.
For those you do not know, Sabanci is the industrialist family that controls many of Turkeys business and hence their opinion is important as they also dumped their currency in 2001 in advance of the devaluation. Some say that they caused it by exiting the lira with their billions.
Conclusion - long Turkey, Short Lira for the next 3-6 months. Good luck shorting a high yield currency though. So my view is kind of redundant.
Obviously many funds are running a carry trade, and so I have read that a carry trade can enforce stability of a currency on occasion, thus limiting the risk to devaluations that can occur.
I have the paper that describes this carry trade stability thing, but in the case of Turkey, fundamentally, when Ms. Sabanci says its overvalued, its overvalued.
The Sabanci's need a low currency to sell their goods at reasonable prices to europeans. This is coming under pressure. Export problems aside I am a bull on Turkeys economic growth and lived there in 1999, and know how the country operates.
For those you do not know, Sabanci is the industrialist family that controls many of Turkeys business and hence their opinion is important as they also dumped their currency in 2001 in advance of the devaluation. Some say that they caused it by exiting the lira with their billions.
Conclusion - long Turkey, Short Lira for the next 3-6 months. Good luck shorting a high yield currency though. So my view is kind of redundant.