Just as investors can base their decisions on a variety of analyses, factors that can be characterized as psychological also play an important role. In this regard, when the expectations that direct the markets cause positive movement, the confidence and even deeper than that, the positive perception it brings plays a critical role.

With the reality of this movement, we must move away from the disputes over the topic of interest, which has recently flared up, and turn our focus towards trust and stability. I realize that I left myself open to plenty of criticism from our visitors for this column.

These factors that I have emphasized must not be lost amid all the dust and noise. We will find the need for these same factors for Turkey’s future as being the most crucial necessity that cannot be lost.  And for this reason, we must not only pay close attention to the short-term developments, but we must not lose sight of our perspectives in the long-term.  This is especially if the related disputes are being used as material against mutual establishments and carries the risk of battering the markets.

The Dollar Index example

The index that measures the value of the U.S. dollar against the currencies of 6 developed economies seized a rising trend in 2014 and especially in the 2nd half of that year. This climb steepened in 2015 and is continuing to do so. The main factor here is the feeling that time is running out for the FED’s interest rate hikes.

We have been witnessing this inclination in the past weeks. Since February 25, a particular acceleration that catches the eye is that, as I put my pen onto paper, the latest situation, as of Thursday, is that the index has risen 5.4% in 15 days. In other terms, it has risen against the basket in subject to the index.

Let us make this clear that the basket that makes up the index has different weights with the Euro making up most of it. Hence, the activity of the Euro can seriously affect the total index.

The Euro’s sharp decline

To again put a definite value on its latest activity when looking at February 25 and beyond, we can see that in just 15 days the dollar gained 6.5% value against the Euro. This change of rate in a short period of time is rather certain. As for behind the curtains, the European Central Bank’s (ECB) move of monetary expansion is playing a considerable role.

In that case, let us underline that the activity in the Dollar Index and also the Euro/Dollar parity affects the U.S. economy and FED, and the Eurozone economy and the ECB. Without getting into detail, let us take note that aside from the Euro, other currencies have also naturally lost value in the Dollar Index.

Brazil and S. Africa are drawing attention

Alright, so what about the developing countries? What is the situation of their currencies against the dollar? Again, when we look in general, as of 2014 we already know that they have started to decline especially because of the effects of the FED. When we look at latest period which the TL’s activity has been mulled over, we understand that a majority of these currencies are continuing to fall, but there is a difference in the rate of decline.

For example, again after February 25, we are witnessing that activity is continuing in the rising economies’ foreign currency markets.  The most attention-grabbing currency of a rising country is Brazil’s Real, which has lost a value of 9% against the dollar. The South African Rand is following the Real with a loss of 7%. Losses of over 6% values are present in Eastern Europe. As of today, the loss of the TL is 4.2% in retrospect, for countries such as Mexico, Indonesia, and India, losses are at a lower level.

As it appears that while the fall of the TL is slightly less than the recent Dollar Index and the Euro, the Brazilian Real, S. African Rand, and a set of Eastern European countries, it is higher than certain rising economies.

Minimizing risks

As a result, if you take into account that every country has different parameters, we can see different losses in face of the dollar; but the larger picture shows a trend that has enveloped the world. Of course, these outside developments cannot be missed; however, in order for the the rate of exchange to see moderate progress, it is in our hands to reduce the risks from the internal factors.

Therefore, alongside the macroeconomic factors, it is my opinion that the main factor is to build up a strong sense of stability and trust. In this way, we can minimize the risks that affect the markets, and also, we can avoid the exaggerations of these risks. At least this way we will have done everything in our power.

The Central Bank and our political authorities have taken favorable steps in the days that have recently passed. As you know, this week Turkey has witnessed two important meetings on economy. The main messages that surfaced in the summit and briefing were; “The CBRT’s respect for its independence” and “the importance given to trust and stability.”

This is superb…

Now by writing this article, I once again left you, my valued readers, exposed to the subject of trust and expectations; however, I could not pass without touching upon this. One note cannot be overlooked: Trust has moved to the ‘Summit’.