Turkish Lira (TRY)

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m22au

"Lira Slide Becomes One-Way Bet as Traders Test Central Bank"
https://www.bloomberg.com/news/arti...omes-one-way-bet-as-traders-test-central-bank

"Lira Bounces As Turkey Reaches "Whatever It Takes" Moment"
https://www.zerohedge.com/news/2018...dogan-anxiety-sends-lira-bonds-record-er-lows

"It appears Turkey just reached its "whatever it takes" moment as Prime Minister Binali Yildirim warned that "speculative attacks on our economy are being made," and promised "the central bank will do what's needed, when needed" in fight against inflation."

but

"“it is also a well known notion among market participants that Governor Cetinkaya may have limited room to raise rates in the current domestic environment,” said Piotr Matys, a strategist at Rabobank in London."

At the TRY lows, EURTRY was at 5.1947 and USDTRY was at 4.1944

Since then the TRY has appreciated by about 1%

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Turkey has a long history of being a "serial devaluer" of their currency. Caution to anyone who cares to bet otherwise.

Last BIG one was a "1-for-1,000,000" job. ~2005, if I recall.

IOW... the government "lopped 6-zeroes off of the old currency to make the new".

(Same game America is playing but at a slower pace.)

We Americans don't take much notice of nor stock in the notion of a "collapsing US Dollar"... but it's a REALLY big negative deal as it escalates, should it do so.

IOW.... You might have a "$Bazillion", but when it becomes worthless, doesn't matter how much of it you have, you're still busted*. Don't believe it? Need examples? Besides Turkey, how about Weimar Germany, Zimbabwe, Venezuela, and others.

*In the "1-for-1,000,000 revaluation" of the Turkish Lira in 2005....the stock market had previously run up more than 2 MILLION PERCENT. And had you been fortunate to be long for all of it, you still would have lost 98% of your buying power in the revaluation.

Bottom Line.... IT'S BAD FOR ALL OF US IF THE GOVERNMENT PURSUES A POLICY OF WEAKER $$$!! (Small currency devaluation harms all of us a little while helping exporters a bit. But when the $Dollar weakness/currency devaluation kicks into high gear, we all get hosed big time.)
 
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Scataphagos said:
We Americans don't take much notice of nor stock in the notion of a "collapsing US Dollar"... but it's a REALLY big negative deal as it escalates, should it do so.
More...
Ernest Hemingway — 'How did you go bankrupt? Two ways. Gradually, then suddenly.'
 
Scataphagos said:
Turkey has a long history of being a "serial devaluer" of their currency. Caution to anyone who cares to bet otherwise.

Last BIG one was a "1-for-1,000,000" job. ~2005, if I recall.

IOW... the government "lopped 6-zeroes off of the old currency to make the new".
More...

That's not a devaluation... A 'revaluation' is not the same as 'devaluation'. That's creating a new currency and taking out of rotation the old. Like a reverse stock split.

Not saying they don't devalue... that's being done more gradually.
 
JackRab said:
That's not a devaluation... A 'revaluation' is not the same as 'devaluation'. That's creating a new currency and taking out of rotation the old. Like a reverse stock split.

Not saying they don't devalue... that's being done more gradually.
More...

You got it wrong, buckeroo. A 1:10 stock split preserves the buying power. In Turkey, it got so bad that a cup of coffee cost 3 million Lira. After the "revaluation" of 1:1 Million, a cup of coffee cost 3 Lira. The revaluation is just arithmetic. It was the devaluation via inflation that busted everybody.

Of course Turkey's 1:1 Million "preserved" what was left of everyone's buying power when coffee cost 3Million.... except there wasn't much "buying power" left. If someone couldn't afford 3Million old Lira for coffee, he also couldn't afford coffee that cost 3 new Lira.
 
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Scataphagos said:
You got it wrong, buckeroo. A 1:10 stock split preserves the buying power. In Turkey, it got so bad that a cup of coffee cost 3 million Lira. After the "revaluation" of 1:1 Million, a cup of coffee cost 3 Lira. The revaluation is just arithmetic. It was the devaluation via inflation that busted everybody.

Of course Turkey's 1:1 Million "preserved" what was left of everyone's buying power when coffee cost 3Million.... except there wasn't much "buying power" left. If someone couldn't afford 3Million old Lira for coffee, he also couldn't afford coffee that cost 3 new Lira.
More...

Buckaroo? I'm in Australia so that should be Jackaroo! ;) :D

I'm not wrong, you're just misreading my post, I think we're talking about the same thing here... I was pointing to the fact that the inflation in Turkey which caused this didn't happen overnight. And in the end, a cup of coffee cost 3 mln Lira, which is not exactly good for all kinds of reasons... accounting etc. So this is after the fact that inflation has been rampant. Basically the "devaluation" of the Lira... which had been killing the buying power.

So then the Turks decided to just shave off the excess zeros to make it easier to deal with... so that's the "revaluation" of the Lira. Done overnight, with a shadow system in place for however long to get the old notes out of circulation.

So the overnight revaluation is exactly the same as an overnight reverse stock split. Since in the morning you still have the same amount.

You had 30 mln Lira (old) and could buy 10 cups of coffee, then in the morning you have 30 Lira (new) and can still buy 10 cups of coffee.... (c.p. everything should be re-priced).
You had 1.000 stocks at $1 worth 1k... a 10:1 reverse stock split gives you 100 stock at @10 for 1k.

Buying power is exactly the same at time of conversion... bucko..
 
JackRab said:
Buckaroo? I'm in Australia so that should be Jackaroo! ;) :D

I'm not wrong, you're just misreading my post, I think we're talking about the same thing here... I was pointing to the fact that the inflation in Turkey which caused this didn't happen overnight. And in the end, a cup of coffee cost 3 mln Lira, which is not exactly good for all kinds of reasons... accounting etc. So this is after the fact that inflation has been rampant. Basically the "devaluation" of the Lira... which had been killing the buying power.

So then the Turks decided to just shave off the excess zeros to make it easier to deal with... so that's the "revaluation" of the Lira. Done overnight, with a shadow system in place for however long to get the old notes out of circulation.

So the overnight revaluation is exactly the same as an overnight reverse stock split. Since in the morning you still have the same amount.

You had 30 mln Lira (old) and could buy 10 cups of coffee, then in the morning you have 30 Lira (new) and can still buy 10 cups of coffee.... (c.p. everything should be re-priced).
You had 1.000 stocks at $1 worth 1k... a 10:1 reverse stock split gives you 100 stock at @10 for 1k.

Buying power is exactly the same at time of conversion... bucko..
More...

In the end we are talking about the same thing "devaluation" => "revaluation"... but that was only a footnote to my original post.... which was about "Turkey having a long history of inflating their currency into near oblivion and destroying the buying power of its people". In their last great cycle, their stock market went up >2,000,000%. But even those "fortunate" enough to be along for all of that ride took it in the shorts. (1,000 Lira at the start of the inflation would have been only 20 Lira (new one) after the revaluation.... and that's not even accounting for capital gains taxes, if they have them.)

You have the last word....
 
Moral of the story... don't hold Turkish Liras... and don't just put money in a savings account... especially when in Liras.
 
TRY rallied in the past week
https://finance.yahoo.com/quotes/usdTRY=x,eurTRY=x,TUR,TKC,GC=F,USDJPY=x/view/v1

following the announcement that the next election will be brought forward to June 24:
https://en.wikipedia.org/wiki/Turkish_general_election,_2018

Economic indicators via tradingeconomics.com
https://tradingeconomics.com/turkey/indicators

CPI inflation
https://tradingeconomics.com/turkey/inflation-cpi

CPI inflation m-o-m
https://tradingeconomics.com/turkey/inflation-rate-mom

Interest rates
https://tradingeconomics.com/turkey/interest-rate#historical

Currently interest rate is 8.00% and CPI inflation is 10.23%

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