US Dollar And Turkish Lira Exchange Rate

US sawbuck And Turkish lira Ex neuter numberIn finance, the rally respects which are besides known as the foreign- convert frame up, forex rove or FX invest between two currencies is how much angiotensin-converting enzyme money is worth in terms of the new(prenominal). In different(a) words, it is the order of a foreign countrys property in terms of the home countrys currency. Furthermore, the foreign transmute market is considered as one of the largest markets dominating in the dry land, and nearly about 3.2 trillion USD of currency changes trans motions takes place every day. special(prenominal) currencies become more valuable when demand for it is greater than its offer. On the other hand, it will become less valuable or in other words it will discredit whenever demand becomes lower than its tack. Investors all everywhere the population will probably choose to buy certain currencies plainly if the return on this particular currency is high. Therefore, th e higher the countries worry step, the greater will be the demand for that countries currency.We chose to compare the $U.S a acquirest the Turkish Lira as we know that bomb is a very strong country with a drifting currency that is, not fixed rallying rate. dud is well up known and popular for exporting textiles and c make dohes all over the world and taking to consideration its past recital at a format in magazine it had ruled m whatever parts of the world and so it was among the most postful countries ruling most of the Arab countries. Therefore, we chose to select the Turkish Lira and compare it to stand in range of the $U.S and analyze what lawsuits or factors go through check to the derogation or the appreciation of the Turkish lira.Our aim in this question invent is to develop a general lowstanding of the forex market world and be able to compare and analyze different markets in the swop market as well as relating national and international events and facto rs alter to the success or the failure of a particular currency. Moreover, we will gain the knowledge of tips of smart international business activities such as currency commuting investments for instance when to buy or sell certain goods under certain currencies. bomb Economy OverviewGovernment Type Parliamentary ,Representative, Democracy. notes Turkish LiraTurkey economic is largely dominated by modern industries and the services sector. Also, its one of the galloping countries in world in comers of agricultural products textiles motor vehicles, ships and other transportation equipment construction materials consumer electronics and home appliances and they signification non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food, feed and beverages to att residueant in European Union, China, Canada, Mexico and japan Furthermore, the gross domestic product it worth in celestial latitude 2099 -6.50% -7.00% Jun 2009 of the world thrift, according to the World Bank.1As we can see from the add-in above, the Turkish lira rising prices rate has experienced a detectable disinflation rates which is destined as the sulkying in the rate of the inflation as well as a remarkable decline in the volatility of inflation which is out-of-pocket to some factors such as mean(a) fiscal and monetary policies. However, previously since the 1970s and the 1990s the Turkish lira had been depreciating in its currency value due to turkeys constant inflation.US Economy OverviewGovernment Type Constitution-based federal re globe strong classless tradition.Currency US Dollars.The economic history of the fall in States has the largest national economy in the world in both nominal and purchasing power parity. In amplification, US ache a stable overall gross domestic product product rate, a low unemployment rate, and high levels of investigate and capital investment. The United States staring(a) Dome stic Product is worth in celestial latitude 2009 -1.90% kinfolk 2009 -2.50% of the world economy, according to the World Bank. The US has several export minute commencement ceremony the export is machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverage to partner Canada, European Union, Mexico, China and Japan. In addition, US meaning non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food, feed and beverages. To the Main import partners are European Union, China, Canada, and Mexico and Japan2.N/A ,0.03%(Jan 2009) bow Source InflationData.com (2003- 2009). Inflation Rate in Percentfor Jan 2000-Present. Retrieved on 8-12-2009. http//www.inflation data.com/inflation/Inflation_Rate/ newInflation.aspOn the other hand, U.S.A seems to have resembling inflation rates across the socio-economic classs, as the U.S economy is consid ered to be the largest in the world.Forex rate transcription used in TurkeyTurkeys commuting rate has been changing over the past years and this can be connect to its economy validated in many ways. In 1990-1997 Turkey commutation rate trunk was considered as a crawling band which mover that the Currency is maintained within certain vacillation margins around a central rate is adjusted periodically a fixed preannounce rate or in receipt to change in selective numeric indicators3.However the give-and-take rate in 1998 -2000 was crawling peg which define as the currency is adjusted periodically in small get along at a fixed preannounce rate or in response to change in selective quantitative indicator.4Since 2001 the exchange rate change to independent foul uping which can be defined as the exchange rate is market determine with any foreign exchange incumbrance aimed to moderating the rate of change and preventing undue fluctuation in the exchange rate rather than at estab lishing a level for it5. This change has interpreted place after the monetary crisis the country had at the same time which resolving power the Turkish lira to depreciate against the euro.6After conducting Turkey the floating exchange rate system had lost more than 50% of the Turkish lira value. Therefore the lira comprehended in the mid of 2002 all the same their sensitivity fluctuated in the exchange rate. After this appreciation, the lira depreciated again due to the Iraq crisis. On the other hand the Turkey government takes some action to prevent the lira and its economy from certain events such as substitution to formal inflation target regime. On 2006 the central wedge utilise the formal inflation target and it used the interest rate as a short instrument which was the result to depreciate the lira again.7Forex rate system used in USAs a take of fact, the U.S mainly went through two different exchange rate regimes. The first referred to what is commonly known as the Br etton woods system of fixed exchange rates and this has been the period from 1958 till 1973. However, after that period and until this day the exchange rate regime is referred to as the managed floating .The first, which lasted effectively from December 1958 to contact 1973, was the Bretton Woods system of fixed exchange rates. In the second, which began in demo 1973 and has continued to the present, exchange rates have been subject to managed floating which is characterized by fluctuating exchange rates on a daily ground however they are ingrained by the intervention of the U.S central bank in order to stabilize their currency by buying and change their own currency.Turkish Lira historyFirst liraTurkish lira is the currency of turkey that is subdivided into 100 Kurus. Turkish liras symbol is TL and according to the international modular its code is TRY. Turkish lira had experienced many difficulties and changes in its history. To begin with, the Bimetallism system was embrac eed in turkey between 1881 and 1884. Bimetallism refers to the fact that the country functions on a double tired in other words both atomic number 79 and silver were used. agree to turkey at that time 1 lira = 519 grams pure gold = 99.8292 grams pure silver8.Then, the classical gold standard was adopted in turkey from 1881 until the 1914. Gold standard means that under this particular standard the exchange rate between any two currencies will be determined only by their relative gold contents.9 However this system vanished and the gold lira was worth nine lira money. As a result, and after all those changes that took place in turkeys monetary system, they pegged to British pound, past to French France, and finally to U.S.A dollars10.Second lira-After all the difficulties in January 2005 six vigoures has been deleted from the lira currency and the Turkish lira generally became the decreed currency and unit of payment in turkey. The categories of liras book notes were 1, 5, 10, 20, 50, and 100. In addition the coins Category were 1, 5,10,20,50,100.11As a matter of fact, a lot of countries fall off zero(s) from their currency in order to facilitate their transactions and avoid any mistakes.Dropping six zeroes and the effort to decline the inflation impact on the currency is a useful way for turkey to have a good reputation in its lira currency. Therefore dropping the zero from its currency had reduced the mistakes and hassles that had arisen in the calculation side and record problems. In short, the transition to the forward-looking Turkish lira was necessary both for the anticipate positive effects on the currency, as well as for its reputation. Furthermore, the New Turkish Lira is considered also as a symbol or a sign of Turkeys determination to reduce inflation.12Turkish Lira against the U.S. Dollar during the past 5 yThe down the stairs graph demonstrate the style of the exchange rate of Turkish Lira against the U.S. Dollar during the past 5 years , which reflects the economic situation in both countries.Table Source bumpkin finance (2009). TRY/USD (TRYUSD=X). Retrieved on 8-12-2009. http//finance.yahoo.com/q/bc?s=TRYUSD=Xt=5yl=onz=mq=lcTable outlining the exchange rates desired on a daily priming coatIn our research, we are going to study the exchange rate fluctuation between the Turkish Lira (TL) and the U.S Dollar (USD) during the period from 14 folk to 4 December 2009. Our study depends on using the daily data of FX of TL against the USD and will focus on analyzing the factors and events that affect the exchange rate and interpreting the causes of fluctuation during the period of study.The exchange rates graph on a daily basis synopsis of national and international events modify to results we obtained from the graph17 September to 1 OctoberAs traced from the graph, the Turkish Lira had a downward aslant against the US Dollar beginning from 17th September to 1st October 2009 this may be due to the fallowing factors and events.Events-Turkish bond yields rose on due to worries about the countrys widening calculate deficitReduction in Turkeys GDP which has lead to the depreciation of the Turkish lira against the $U.S.Turkey seeks bids for sugar factories. Turkey is selling six factories that produce sugar to finance the global slow down economy. Turkey also trying to reduce the government control in its economy. However this event will test turkey privatization13.Factors-September 2009 Balance of Payment cypher of the government The current account deficit realized a huge ontogenesis by 60.5% from 558 in August 2009 to 869 in September 2009. This reflects the increase on the country expenditures over revenues that negatively affected the TL exchange rateThe level of the country look at The deficit of the goods and services change magnitude by 18%, which is a mean of increase of TL supply over demand that is reflected negatively on the TL exchange rate, and put a pressure on the TL to depreci ate against US Dollar.14US inflation decreased from -8.90 in June to -9.90 in September. Therefore US $ revalued over the TL.Turkeys industrial production fell by 8.6% in the year to September. The biggest decline was in the production of capital goods, the output of which fell by 18.2%.151 October to 15-October-During this period our graph trouble went up due to the below factors and eventsEvents-In October 2009 the annual meeting of the World Bank held in Istanbul, this was the clenched fist time the meeting being held in a country other than the United State.The country outlook rating of Turkey outlook has been upgraded by the two rating agencies Moody and Standard Poors. In addition to that, t move outher is a strong prob powerfulness to upgrade Fitch rating room of the Turkey outlook rating. This is due to Turkeys policies in handling the financial crisis and its ability to implement policies to stabilize the economy.16Factors-Inflation the Central Bank of the Republic of T urkey decreased the inflation rate from 5.27 in September to 5.08 in October 2009. This is considered a positive indicator that leads investors to invest in TL, consequently, TL appreciated. We can observe that the Turkish Lira firmed in October than its performance in September against the US dollar and this was due to the fact that the central Bank of Turkey declared that the annual inflation in October would be low despite the end of stimulus impose cuts on durable goods and a near 10 percent hike in power prices.16 October to 28 October-During this menstruation our graph has a downwards swilling due to the below factors and events.Factors- enkindle rate a Central Bank of Turkey lowered its interest rate from 7.75 in September. To 6.75 in October 2009. As a result the TL depreciated ay the beginning of October reflecting the expectations of the investors that the currency will have downward direction.Budget finance minster of Turkey stated that Turkey end-2009 budget deficit o f 62.8 billion lira ($43.1 billion) before a fall to 50.1 billion lira in 2010 which affect TL negatively.29 October to 8 NovemberAs the Graph show the TL lira appreciate in this period due to some factors and events.Events-As reported in Turkey intelligence operationpaper four officials at the tax fleck were suited for damages caused by the record tax office the case was brought by the media group.Factors- embrocate the crude oil prices went up on November 2009 this is in indicator that investors shift their investment from dollars to oil leading dollars prices down, wherefore TL appreciated against US dollars.US dollar Federal fill-in on Wednesday 5th November offered a caution economic outlook and unploughed borrowing costs near zero as a result the US dollar depreciated and the TL appreciates.The Turkish bank Turkey Ekonomi Bankasi have r individually 47 % rise of profit which leads to upward TL sloping .9-Novamber to 25 NovemberThe graph illustrate that the TL has been de preciated in this period for those factors and events.Factors monetary stability report the CBRT has telled the financial stability report, the report indicates that Turkey economy would notice a slow improvement, and in banks profitability levels in 2010 would decrease. According to the report the consumption levels is expected decline which will lead to lower the investment expenditures. This news has affected the public confidence in the economy of turkey and resulted in a decline of the TL exchange rate.Unemployment rates According the Hurriyet Turkish news paper unemployment rate problem would still grow and would not be solved anytime soon. This is also a negative indicator that TL value will decline.US Gross Domestic Product The third quarter economy statistics of the US have been published on 24 November 2009, it shows that the US GDP has increased at an annual rate of 2.8%, this increase in US GDP is a result of the positive contributions from personal consumption expendit ures (PCE), exports, private inventory investment, federal government spending, and residential fixed investment that were partly offset by a negative contribution from nonresidential fixed investment. As a result USD gained more confidence and rose against the TL.26 November to 30 NovemberAs the graph shown in this period the TL has a downward slop which is the most negatively sloping at the analysis period of our project.Events-From 27 to 30 November Turkey government and business sector had a public holiday to observe the occasion of Eid Al Adha. The economy during this period slow down and this caused the downward of the TL exchange rate against the USD.The global crisis has hit turkey trade especially turkey exports to neighborhoods decrease to 7.7 % as publish in Hurriyet day-by-day News and sparing.EU to ask Turkey to adopt a more European Iran policy The European Union welcomes Turkeys modify role in the Middle East but feels uneasy with its Iran policy,17FactorsOil Oil price decreases on 25 of November which attract investor to buying oil by dollars as a result the TL depreciate.Inflation in November the turkey inflation rate increases from 5.08 on October 2009 to 5.53 in November which lead to depreciate the TL in this time.Balance of trade Turkey balance of trade increase from -2573.0 to -3948.0 deficits which mean that turkey import increase in November change magnitude the supply of TL which leads to downward TL.1 December r to 4 December-As we observe after the deep down wards at the end of November the TL appreciate at the beginning of December leads to up slopping.Events-Turkish news has announced that Turkish lender Sekerbank has signed a deal loan with the international finance cooperation to finance the agriculture and foods project that worth 30 millions.Turkey news has announced that turkeys poverty rate has decreased from 17.79 percent in 2007 to 17.11 percent in 2008which leads to strong Turkish lira reputation.FactorsGold the gold price increase from 1054.00 on November to 1115.40 on December as a result the investor shift their investment direction to invest more in safe assets which is gold leading to supply the market by dollars as result the dollars depreciate and the TL appreciate .Government Budget the Turkey government budget has 989.80 surpluses on December after having a budget deficit for the past month. As a result the TL appreciated.Current Account the current has increase from -863.0 on September to 671.0 on December which mean the export is greater than import and the demand of TL is greater than supply leading appreciate TL on December 2009.Conclusion-In conclusion, we have benefitted a lot from this study as we were able to analyze the Turkish lira exchange rate against the U.S Dollar as both economies have many factors and events alter this exchange rate phenomenon such as gold reserves, balance of payments of each country, unemployment rates in addition to inflation rates, crisis in other countries, as well as many other implications .Furthermore, As for the exchange rates instability during the past three months as was required for us to analyze, the Turkish-dollar exchange rates observed several highs and lows which was generally due to multiple political, economical, neighborly factors, and fiscal monetary policies by both countries the U.S and Turkey. 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