In a year the value of the Turkish currency has lost half of its value compared to the US Dollar.
The price of one US Dollar is on the rise. At least if you are trying to buy it with Turkish lira. The national Turkish currency is dropping its value in what seems to be a constant fall of the currency. Since the beginning of 2021, the value of the lira has been halved. So, when 1 US dollar costs 7.5 liras at the beginning of the year, it now costs around 15 liras.
This is caused by a financial policy by Turkish president Racep Erdogan, which is called unorthodox by many experts. The center of the discussion is the interest rate. In traditional books of economics, the whole principle of monetary policies is to increase interest rates in times of inflation. But that is against the will of President Erdogan who, unlike traditional economic thinking believes, that raising interest rates is evil. Earlier in 2021 when the leader of the Turkish central bank increased the Turkish interest rate he was fired by the Turkish government. This is making newly appointed central bank leaders less likely to increase the interest rate.
The skydive of the lira is a big problem for the national economy. When money loses its value, it can have a short-term effect on the export of goods, when the prices will be cheaper at the international market. But similarly, prices will go up for importing goods. Therefore, it’s a big problem for the Turkish economy that the drop of the lira has caused the international prices to double since the beginning of the year. For the price of two apples, you can now only buy one. This has for instance led to the popularity of Bitcoins in Turkey.
Bad Impact on Lira Trading
The drop has been going on for many years and made the lira an unreliable currency to invest in as a trader. When the fundamentals of winning in trading are predicting which currencies will rise compared with other currencies, a general decline of a currency is not giving any wins. But when the currency hits a low, it’s a good potential for future trading investments. The basic principle is to buy cheap and sell after the currency has risen. Learn the basics of trading here.
But remember to follow global news on economics, as political news is having a massive impact on how well the currency is performing. It was clear to see how the decline of the Lira impacted the trading market. In November 2021 the trading with the lira almost stopped, as the currency fell by 15 percent in a single day. As morning became midday you could simply see the forex investors stopped trading with the currency. Nobody wanted to buy lira in the middle of its drastic skydive. The question is now when the lira will begin to increase again.