Worry about a foreign exchange explosion! Will the dollar skyrocket after the election?

Worry about a foreign exchange explosion!  Will the dollar skyrocket after the election?

After the 2023 Presidential Elections, the exchange rate exploded. Dollar and Euro reached historical peaks against Turkish Lira.

In the two months after the election, TL lost 34 percent of its value against the dollar.

It is wondered whether there will be a sharp rise in USD/TL after the March 31 Local Elections.

The writer of Ekonomim, Alaattin Aktaş, answered the question that everyone was wondering about.

Alaattin Aktaş stated that there is a low probability of a sharp increase in the dollar exchange rate after the local elections.

Aktaş explained the reason for this as follows: “Neither the conditions of the past period approaching this election are the same as the last election, nor the increase in the dollar or the accumulated residue.”

The relevant article by Ekonomim writer Alaattin Aktaş is as follows:

“It is our never-ending concern; we always think that one day the dollar will climb and go away…

Especially if the foreign exchange rate has been horizontal or close to horizontal for a long time, the belief that this climb is inevitable becomes more prevalent…

We are not wrong to think so; There have been booms in the dollar from time to time. We experienced the last one after last year’s elections.


Now we are in similar concerns. We think that the exchange rate has been horizontal for a long time, so it will be freed from its chains after the election.

But there are some details we ignore.

The exchange rate was almost horizontal before the May 2023 elections. However, it is not like that now.

It is true that the exchange rate is almost fixed before the May 2023 elections. The Turkish currency was no longer losing value, the dollar remained almost stable for months. The May election is over, the need to hold the dollar has disappeared and there has been a 34 percent increase in the total between June and July.

Now the same concern is experienced…

It is being discussed whether there will be a rise in the dollar similar to last year after the March election is over. Perhaps, to put it correctly, the question is not whether this escalation will occur, but how much it will occur.


It’s like the bets are on! There is already a perception that the highest estimate is the most realistic estimate, which is why the numbers are floating around in the air.

So, let’s try to examine why there is little or even no possibility of the dollar climbing like last year…

It won’t be the same size as last year, because…

Although this year and last year seem similar, they are quite different.

First, let’s look at last year’s data…

We created a dollar index by taking September 2022 as 100. Accordingly, the dollar, which was 100 in September 2022, increased to 107.68 in May 2023. The eight-month increase is only 7.68 percent. The next two months, as I mentioned in the introduction, were the disastrous months when the pain of the low increase in those eight months came out.

Let’s come to this year…

This time, we accept the dollar exchange rate in July 2023 as 100 to take the eight months before the election as a basis. The average value of the dollar in February has been 30.45 lira so far. We can assume that the February average will be 31 lira and the March average will be 32 lira. In this case, the dollar index, which is 100 in July 2023, will increase by 21 percent to 121 in March 2024.


Now pay attention; The increase in the dollar in the eight months before last year’s election was approximately 8 percent, while the increase in the eight months before this year’s election was 21 percent.

-There was a 34 percent increase in two months, on top of the 8 percent increase before the last election.

-Will there be a 34 percent increase in two months, on top of the 21 percent increase before this year’s election? It won’t come!

Just imagine where the dollar, which is likely to have an average of 32 lira in March, would reach if it increased by another 34 percent in a few months!

Meanwhile, when making assumptions about the exchange rate increase, there is no doubt that inflation should also be taken into account; That is the subject of another article.

It does not have to be the same

Moreover, it is not expected that the total exchange rate increase before and after each election will be at the same level.

For example, there is a huge difference between the interest rate in June and July last year, when the exchange rate increased by a record, and the current interest rate.

The policy rate was applied at 8.5 percent until June 23 last year and was increased to 15 percent since then.


When the interest rate was increased by only 2.5 points to 17.5 percent on July 21, when it was expected to increase by at least 5 points, pessimism prevailed in the market, and all this resulted in a rapid increase in foreign exchange.

However, now the interest rate is 45 percent and this rate will not change for a long time.

I say this regardless of the debate about whether 45 percent is enough or not; At least there is a big difference between last year’s rates.

Therefore, there is a very different level in the basic factor that will determine the change in the value of foreign currency, such as interest, between last year and this year. “Even if all other factors are the same (and those factors are not the same), there is a significant difference arising from the level of interest.”

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