Cyprus News | Turkish Lira | £1 Buys 3.20TL – Buy Beer!
The Turkish Lira has tumbled over the last few days and finally broke through the 3.20TL=£1 barrier this morning. The Turkish Central Bank had $40bn to try to stop the decline of the currency but it has become apparent that buying the currency is having little effect on underlying cause of the weakness.
Goldman Sachs is forecasting a dollar-lira rate of 2.2TL which represents a £1=3.50TL, assuming sterling remains at the same level against the US dollar. Many people in north Cyprus buy lira when it’s weak, hoping for an interest rate around 6-8%pa, and sell when it strengthens. In the past this has meant buying at 3.0TL/£1 and selling at as strong as 2.20TL/£1.When to buy seems to be set in many people’s minds as being at 3.50TL/£1. When to sell, who knows???
What about the impact of a weak lira on north Cyprus? Two scenarios come to mind. Firstly fuel prices, beginning to rise under the threat of a Syrian ‘intervention’, will rocket to over 3.50TL but will have little impact on those with incomes and investments in sterling, euros or dollars for example. Inflation will increase and, for those who have been here a long time, will possibly return to double figures again.
There is little doubt that union-government stand-offs will increase and with it strikes and social unrest. That’s unless wages are increased across the board and inflation allowed to soar. If that is the case then ex-pat outgoings will look little different from now. To use the local universal currency of a supermarket 500ml Efes, 2.2TL if you shop around. This was equivalent to £1 a year or so ago, 75p a few weeks ago, and if £1=3.50TL then it’ll cost 65p. More likely it’ll be priced upwards, although sometimes only at the till and not the shelf, so if you have any lira hanging around
NCFP Tip of the Week: BUY BEER!
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