Turkey's lira shows winning ways against the dollar

September 21, 2011 at 8:00 am by

Turkey’s lira is continuing to climb in world markets, and is the third-best performing currency against the dollar this year. 

The lira is up more than 15% against the dollar for 2011, behind only Kenya’s shilling and South Africa’s rand, up 19% and 17% respectively.

The currency was hurt a bit in August. Economic reports indicated a growing economy, but the central bank committed market heresy — in the view of some monetary folks — and cut interest rates a quarter point, raising fears it would touch off inflation.

The latest boost to the lira came yesterday when Standard & Poor’s Corp. raised Turkey’s local-currency sovereign credit rating one step to BBB-, lifting the bonds to investment grade territory.

The lira closed down 1% in New York trading Tuesday at 1.7878 from 1.8060, but its up more than 17% from its low for the year.

Turkish bankers say they believe the economy around the world will be slowing soon, so the goal now is to position the economy so its products can compete on the world market, and not worry about inflation for now.

Chart forUSD/TRY (USDTRY=X)

The iShares MSCI Turkey Investable Market Index (TUR) is down about 27% from its peak for the year, though it recently has begun regaining some ground.

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  • http://blog.frontierstrategygroup.com/ Frontier Strategy Group

    Companies producing in Turkey should anticipate lower exchange rate-adjusted costs through next year, while companies selling indirectly to the market should anticipate reduced buying power for dollar-denominated goods. Fahhan Ozcelik, FSG Expert Advisor, also recommends that MNCs operating in Turkey take advantage of the government’s planned incentives for local exporters. One way MNCs can do this is by partnering with local suppliers for semi-finished goods, especially in industries such as textiles, motor vehicles, and electrical machinery.