Dollar’s course to be much clearer by the weekend

While the American dollar continues to gain value against all currencies, we need to wait until the weekend to see its course more clearly, particularly against the Turkish Lira.

It’s not just against the lira; the dollar is gaining value fast against all developed and developing country currencies. The real reason for this is that expectations have risen that the FED will start its increase in interest rates sooner than expected. It is definite that the U.S. employment data that will be released Friday will have a profound effect on the course of the dollar.

Meanwhile, another development that international finance circles are closely watching will be a meeting of the European Central Bank ECB to be held Thursday. By Thursday, there will be several data releases that will show economic activity. The statements of ECB President Mario Draghi expected after the meeting are set to directly concern the value of the dollar, as well as the values of other currencies.
 
There are bank executives who expect or, more precisely, hope that Draghi will announce much more concrete and radical measures – in other words, that there will be serious liquidity fed into the market to revive production in Europe. In this case, they expect that the effect created by the expectation of an interest rate increase by the FED would be balanced to a certain extent, particularly for developing countries, in other words, a slowdown in the pace of the loss of the value of national currencies is expected. In short, they expect the ECB will fill the void created by the FED to a certain extent.

However, to be able to see whether or not this expectation comes true, we will have to wait for Draghi’s statement on Thursday evening. As a matter of fact, there are also some people who say that, since the ECB has continuously been creating empty expectations, this time markets will not settle for statements but only wait until measures go into effect.

That is the news from the international finance segment. The news will reveal whether or not gains by the dollar will continue and what Europe’s stance will be against the shrinkage of liquidity. Thus, the future course of all developed and developing country currencies will be seriously affected by them.

Fitch decision important for the lira

In addition to all this, an important piece of news will come on Friday; one that Turkey is awaiting concerning itself. The inflation rate for the month of September that will be announced the same day is also important but not as much as Fitch’s rating for Turkey scheduled for the same day…

There are three alternatives for the Fitch decision: Either the current rating and the stable outlook will be maintained, or the rating will stay the same but the outlook will be changed to negative, or there may be a downgrade in the ratings.

Markets have now adjusted themselves to the outlook changing to negative; they have bought that option. In other words, if the current state stays the same, markets will be positively affected; if the outlook changes to negative then it will not have much of an effect; if the rating is lowered then the market will be stirred. The last is of low probability, but if it happens, the loss in the value of the lira will accelerate.

Of course, these are economic explanations. Domestic political developments or the possibility of clashes related to the Islamic State of Iraq and the Levant (ISIL) have not yet been reflected on market movements because these two developments are only being monitored. We hope that much worse does not happen.