The Turkish lira faces a sharp devaluation. The currency of Turkey registered today a drop of more than 12% and the dollar in that country went to cost 12.8, in a context of tensions in that market due to government pressure on the Turkish Central Bank to lower interest rates and boost the economy.
Today’s it was the deepest crash in the last two decades for the Turkish currency, which has been constantly devaluing against the dollar for two weeks. During the last month, you accumulate a 50% drop and, so far this year, the low extends to more than 70%.
This scenario will remind some of what happened in 2018, when the Turkish lira suffered a significant decline and dragged the rest of the currencies of emerging countries. At that time, this It contributed, among other factors, to a greater fall of the Argentine peso against the dollar.
Analysts predict that now, although the devaluation of the Asian country’s currency may have some kind of impact on Argentina’s, this it should be smaller and very different which was observed three years ago, taking into account the strong exchange controls that are applied in Argentina at the moment.
“If this depreciation of the Turkish lira infects the rest of the currencies of emerging countries, it will have an impact. It will be given with an increase, if that level of devaluation is not followed. Then, become more expensive compared to other emerging currencies, like the Brazilian real, which is a direct competitor of Argentina, “Christian Buteler explained.
In this sense, the financial analyst noted that the Central Bank of Argentina (BCRA) should slow down the movement, but accompany a little so that the multilateral real exchange rate don’t end up appreciating yourself too much, not only because of local inflation, but also because of what happens with the rest of the currencies in the world.
“The impact this time is going to be different from what we saw in 2018, when the Turkish lira fell and he was wearing the Argentine peso. This time it will be different because now there is the exchange stocks in Argentina, which blocks the free movement of local currency“, said the specialist.
Likewise, the economist Jorge Neyro foresees that the effect on the peso will be limited, due to the “strong control of capital that we have in the country, which keeps us isolated from movements in countries with little commercial ties“At the same time, he indicated that the eventual impact is difficult to quantify, due to the complex local conjuncture.
“In general, the strengthening of the dollar globally puts pressure on Argentina’s multilateral real exchange rate, that is already approaching the levels of the exit of the exchange rate, which occurred in December 2015. So it is indeed something to watch closely, “said Martn Vauthier, director of Anker Latin America.
The specialist highlighted that the depreciation of emerging currencies “that exchange mattress is eating“which has the real exchange rate, in a context in which the gradual devaluation that the BCRA is validating continues in the zone of 1% per month, well below inflation, even with regulated tariffs that continue to be trampled and with controls on other prices.
“The global appreciation of the dollar generates capital outflows and pressure on the currencies of emerging countries, And so it is that it also becomes a challenge for Argentina, beyond its own dynamics. In the local case, it will be expressed mainly in the reserve drainage and the exchange gap“added Gustavo Ber.
The economist noted that the depreciation of the Turkish currency and the eventual impact on emerging countries can affect expectations, which will lead to a higher demand for foreign exchange for hedging in the local market and this could exert some greater pressure on the BCRA’s reserve levels and on the gap between exchange rates.