The reason for the low exchange rate of the Turkish lira, should we be concerned?

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The exchange rate of the Turkish lira fell sharply against the dollar and the euro since the beginning of August.

As the price of trading the US dollar against the Turkish lira at 7.30 pounds Friday morning, and the exchange rate of the European euro against the Turkish lira peaked at 8.67 lira.

As the Turkish lira has lost nearly 18% of its value since the beginning of this year.

The Turkey Stock Exchange index fell 3.5 percent as of thursday.

Reasons for the low exchange rate of the Turkish lira

The reason for the low exchange rate of the Turkish lira is limited to the global crisis of the spread of the Coronavirus, and its impact on the country’s economy, especially the tourism sector. As the tourism industry in Turkey accounts for 12% of the country’s total GDP.

Economic activists said, “Given the current situation, we have no choice but to do our best to get out of this situation safely.”

In recent months, the Turkish Central Bank has tried to stop the acceleration of the devaluation of the lira by pumping billions of dollars into the local market.

Also, Turkish GDP is expected to decrease by 4.3% this year compared to last year.

According to the latest statistics, the Turkish Central Bank has $ 51 billion in foreign exchange reserves as of July 24 this year. And according to foreign exchange activists, the central bank has pumped about $ 35 billion of foreign exchange into the market since the beginning of the year to maintain the relative stability of the Turkish lira.

The effect of the rate of interest on the exchange rate

Economic activists also attributed the reason for this recent decline in the Turkish lira’s exchange rate to the fact that the high inflation rate and the recent interest rate reduction by the Turkish Central Bank are pushing investors towards more feasible havens, including the dollar and the euro, which would reduce the demand for the Turkish lira.

Should investors fear the current economic situation in Turkey?

No.

As we mentioned before, Turkey is one of the best countries in the world in terms of dealing with the global Coronavirus crisis, as the country has passed the most difficult period, through several health and economic decisions taken to reduce the severity of this crisis.

Some economic indicators in Turkey have begun to show positive results, as the Turkish industrial sector recorded its highest growth since February 2011, according to data issued by “IHS Markit”.

In addition to the gradual return to the tourism sector after the announcement last month of the very large opening of the borders to foreign tourists, and indeed there have been reports of the arrival of tens of thousands of tourists in recent weeks.

So far, more than 236,000 people have been infected in Turkey and nearly 5,800 people have died of the Coronavirus.

In April and May this year, the number of patients suffering from the Coronavirus in Turkey amounted to about 3000 to 4000 new infections per day, but over the past three months, and with the Turkish government taking strict measures in this regard, the average number of new infections per day decreased to what Below 1000.