The foreign investors came in on Monday bought stocks and the Turkish Lira mainly because of the PMI, GDP, and inflation reports, which turned out to better than expected. This was followed by the carry trade from mainly Asian investors looking for better yields. Also, some bottom feeders were snapping up some cheap valued stocks.
On Tuesday, the dollar was trading around 5.68TRY to the dollar, down from around 5.80TRY on Monday.
In the United States, factory orders, consumer sentiment, jobless claims (weekly), home sales, and industrial output reports all came out negative, pushing hopes up for the Fed to cut interest rates, which would help Turkey and other emerging markets get hold of hot money. Of course, not all the reports coming out were negative in the US. However, this gave emerging markets and hedge funds some hope coupled with the declining yield curve.
Turkey would be a big benefactor if the Fed cut rates because hot money would flow in helping it to prop up its consumer spending and easy credit, which was the formula it used 6 or 7 years ago when the growth rate was super strong above 10%.
Clearly, there are many other variables that drive the economy and the USD/TRY; but bad news for the US is good news for Turkey that seems to be one of the main drivers nowadays.
The Fed probably won’t cut rates until at least November. Therefore, this will keep the the dollar bouncing around.
