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Why TL Value Goes Down Compared to USD in 2016?

Posted by Cenan Can Tekin on 9 December 2016
| 2 Comments
USD vs TL

Everybody is questioning these days what is happening with Turkish Liras. If the decrease in its value occurs because of political issues or because of economic situation or it is because of global effects.

Minimum Rate Seen in 2016

The graph in the photo given, we see the value changes of USD/TL for the previous one year 2016. As we see 1 USD was equal to 2.9 TL approximately by the beginning of 2016. This made some changes during the year fluctuating and its minimum was 2.79 TL at the end of April.

USD vs TL in 2016

1 USD over 3 TL first time

First time 1 USD became equal to 3 TL was on 24th of August in 2015. This was a big mental test for Turkish currency as for long time there were these rumors mentioning TL would loose more value and would test the rate 3.00.

Same scenarios were read during 2016 as well. In January, May and August 2016, the exchange rate tested 3 times this critical limit but returned back to 2.90 s, 2.80 s after short time.

The exchange rate reaching to 3.50 TL and over

The last test had started in October 2016 and this time it was successful and the rate went up continuously up to 3.50 TL. The highest exchange rate between USD and TL was seen on 2nd of December 2016 which was slightly over 3.59. Currently this rate is seen as the highest value ever in Turkish history.

USD vs TL Oct, Nov, Dec 2016

10 Reasons Why Turkish Liras Loosing Value?

Many reasons will be stated for the decrease of Turkish Liras again US Dollars. Time will show the answers. We will name some of these reasons here.

  1. The rate between USD and TL was not real. The exchange rate was same around 1.4 for 8 years between 2002 and 2010 which doesn’t seem consistent with the change in inflation.
  2. USD is becoming stronger globally before and after the elections in United States as American Banks are getting stronger and interest rate for USD is expected to go higher.
  3. The political situation in Turkey. Especially after the military coup attempt. The government’s attempts to change the system to presidential system
  4. The war risk in Middle East Region. The risk at the borders of Turkey.
  5. The terror attacks that occurred during 2016.
  6. The decrease in tourism in 2016 due to unsecure environment in the country showed by international media.
  7. The interest rate of TL is going down because of the strategies of Turkish government which is expected to give better results in long term however causing the drop of TL at the time being.
  8. The reserves of Central Bank of Turkey for USD is heard to be low. Economists state Central Bank cannot give reactions to this decrease for TL.
  9. European Union’s decisions against Turkey and its application to EU.
  10. The scare buying of Turkish citizens due to rumors. Panic press’s effects on people’s behaviors.

The effects on International Real Estate Demand

Real estate demand in Turkey always remain due to young population in the country. Especially in Istanbul city, the prices have been increasing steadily for over 10 years at the moment.

Regardless the rumors rising sometimes negatively in international media, real estate demand from foreigners is at a good level too. For many foreigners the increase in the USD/TL currency created big opportunities. The increase in the last 1-2 years on the prices is even less than the 20% decrease in TL’s value which was lost in the last quarter of 2016.

The real estate sector waits there will be even more demand from foreigners after the political and economic situation in the country becomes stable again. For some investors, they would like to see where the exchange rate will stop and be stable again.

In our opinion, the exchange rate is already at very high levels and prices in TL for real estate projects in Turkey still are not affected. For that reason, there is a very big opportunity for international investors at the moment. As an example, the rate between SAR and USD is fixed at 3.75. That makes 1 million SAR equivalent to 930.000 TL as of today whereas it was equal to 500.000 TL only 3 years ago. Same for an American investor, a property which costs 1.000.000 TL is equivalent to 285.000 USD now whereas it used to be 555.000 USD only in 2013.

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