Inescapable rise of the greenback continues

It’s an ironic debate considering that less than a year ago, when the dollar traded at around 1.2 liras, the debate was whether one lira would be traded at one dollar. The dollar was trading at 1.78 to Turkish Lira at 5:24 p.m. Friday, largely on global developments such as a looming bankruptcy for General Motors, Citigroup's woes and mounting problems in Central and Eastern Europe.

Speaking to daily Hürriyet's Web site, Bülent Topbaş of Strateji Securities said the reason for the rise is Turkey's interest rate policy. "Turkey has fallen behind in the nominal interest league for the first time," Topbaş said. "I think that with each rate cut, the Central Bank has pushed the balance levels of the dollar/lira higher. Unless there is a deal with the International Monetary Fund and the risk appetite in global markets improves, trend of volatility will be upwards."

Topbaş said in the 2006 turbulence, the Central Bank kept the interest rate higher than it should be, resulting in an overvaluation of the lira. "I am now concerned that the extreme fall in risk appetite may be underestimated," he said.

Özgür Yurtdaşseven, research director of the Central Bank, said domestic investors are implementing a "wait-and-see" policy, something they did not do in previous appreciations of the greenback. "This is a global movement, so the Central Bank will refrain from directly intervening in the market," he said. The greenback may see 1.85 liras in the first half of the year, according to Nergis Kasabalı, deputy general manager of Ata Investment, while Murat Salar, deputy general manager of Alternatif Investment, said "the first target" will be 1.85 liras, if the dollar firmly stays above 1.75. "If the Central Bank does not intervene, the way is open until 2 liras," he said. Speaking to private CNNTürk, Alp Tekince, general manager of Ekinciler Investment Securities, said the current levels of the greenback present a "historic resistance." Turkey is following behind the global weakness, Tekince said, adding that the relative strength of the Turkish currency is diminishing.

"The market lacks sellers. Foreign funds are not coming and locals are not selling," Murat Salar, deputy general manager of A Investment, told the ntvmsnbc.com Web site. "In the past, the exchange rate was being balanced by local investors selling the dollar. But today we do not have that. Only the Central Bank intervenes in this process, but that intervention should be decisive. If the dollar continues to rise after an intervention, then the market will start questioning the power of the Central Bank."

Meanwhile, Mehmet Şimşek state minister responsible of economy, gave a negative reaction to reporters who asked him to comment on the rise of dollar, reported daily Milliyet Friday. "I don’t have to deliver a comment on economy for you every single day," he told journalists who were covering his visit to the southeastern city of Gaziantep. Şimşek’s guards blocked journalists who wanted to shoot a video or picture of the minister. They were escorted out from the room, where the press meeting was held, according to Milliyet.