The Turkish Lira Got Body Slammed On Friday

rollandthomas (74)in #money • 6 years ago

The Turkish currency plummeted as much as 17% against the dollar on Friday, after President Donald Trump promise to increase metals tariffs on Turkey.

I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!

This was on top of imposed sanctions on senior Turkish officials earlier this month for their role in detaining an American pastor.

Other concerns over the Lira collapse include, the Turkish economy, the unwillingness of Turkish authorities to raise interest rates and Eurozone's economic ties to Turkey. Eurozone banks have loans worth over $150 billion in Turkey with the Spanish, French and Italian banks most at risk.

The Turkish president, Recep Tayyip Erdoğan, has called on Turks to sell dollars and euros to support the national currency. But it appears the Turks are selling their Lira for Bitcoin.

This move prompted investors to trade their Lira for stronger currencies like the US Dollar, the Japanese Yen and Bitcoin. Turkish Bitcoin exchanges reported huge increases of volume on Friday. Turkey’s largest exchange Koinim reported a 63% increases in Bitcoin volume.

Overall, the Lira has declined almost 40% this year against the US dollar.

I personally think the decline will subside and might be an opportunity to buy the Lira at some point. Just look at the Mexican Peso. When Donald Trump was running for Presidency, he called NAFTA the "worst trade deal in history."

He later went on to say as president, he'd negotiate for better terms with Mexico and Canada, and if they don't agree, he'd pull out altogether. Well when he won the election, the Mexican Peso dropped 25% against the US dollar before nearly recovering most of the lost as of today.

Going back to the Lira, we are talking about a 40% decline in eight months. This is definitely a contrarian viewpoint and not for the faint of heart, but I think some traders out there will take a stab and try to profit if and Turkish economy can at least stabilize and Lira's value increases again and a little help from the US dollar if and when it turns to the downside. Potential upside is at least 15%-20% or a move back down to the 5.00000 level for the USDTRY.