Until a short while ago, Turkey was worried that the lira, Turkey’s national currency kept losing against the US dollar and even experts were not able to make clear statements as to when markets would eventually come to a balance in this regard.
However the lira once seen as the black sheep in the market now seems to be the only emerging country currency to rise against the dollar over the past month. Experts comment this has been due to the decisive change in behavior among local investors. This has caused Turkish lira to add more than 4 percent to its value against the dollar since July 8th.
Experts draw attention to a very unusual picture in Turkish economy lately. Based on data provided by Turkey’s Central Bank locals currently have an investment of over 35 billion in US dollars and they do not seem very eager to change their position either in the near future.
This demand as explained by experts is mainly due to the slowdown in Turkey's economy during the past year. This has also slowed down imports mainly with an impact to decrease Turkey’s current account deficit.
Some experts note Turkey's dependence on external financing has consequently gone down with inflation also slowing down which will contribute to comforting the administration as far is its challenge to cure the economy is concerned.
These observations are interpreted as positive by international experts to include to bankers which believe the lira is still underrated and can enjoy another increase of 17 percent against the dollar based on above evaluations.
The idea here is that the improving inflation profile together with other related factors, display a picture where Turkish assets could still offer attractive yields at the end of the day.
A complementary suggestion is that the strong base effects and the current stability of Turkish lira against dollar would accelerate inflation slowdown as well thus painting even a more promising picture for foreign investors as well.