Turkish President Recep Tayyip Erdoğan’s attempts to bring back the victorious days of the Ottoman Empire are exerting downward pressure on the lira and the trajectory looks irreversible, according to Gaspar Markosyan, a financial market analyst at currency broker FBS Inc.
The embattled Turkish lira, which hit an all-time low of 7.85 per dollar last week, is probably heading for 8 per dollar by the year-end, driven by Erdoğan’s attempted conquests across the region, Markosyan said in an analysis on Monday.
While Erdoğan’s efforts to ‘make Turkey great again’ may be winning support from the country’s poorer classes, the military adventures are costly, create a financial burden on the lira and are turning Turkey into a poor, self-locked nation, Markosyan said.
Moving average prices for the lira have shown it has lost value against the dollar for years, with minor deviations, and the trajectory seems to be steepening, he said.
After sending troops to Syria and embroiling Turkey in a civil war in Libya and a territorial dispute with Greece, Erdoğan is pushing Turkey into yet another unsolvable conflict, this time between Azerbaijan and Armenia over the disputed enclave of Nagorno Karabakh, Markosyan said.
The lira weakening to 8 per dollar would technically push the currency far from its moving average, but when a correction occurs, it will be short-lived compared with the downward pressure Erdoğan’s policies are exerting, he said.
Markosyan recommended shorting the lira.
“The lira will keep losing – Erdoğan guarantees that. Even if he miraculously realises how deep he pushed Turkey into the swamps of surrounding conflicts, the long-term damage to the Turkish economy is already inflicted and will be increasing,” he said.
“So, it will be safe to extrapolate the trajectory as far as you need – the Turkish lira’s chance to rise is now as low as zero.”
The lira traded up less than 0.1 percent at 7.75 per dollar in Istanbul on Tuesday. It has lost almost a quarter of its value this year.