World Bulletin / News Desk
"We put it [lira] in a very undervalued territory, so it's really undershooting what the fair fundamental value ought to be," said Hung Q. Tran, the executive managing director of the Washington-based Institute of International Finance.
The Turkish lira lost approximately 50 percent of its value against the U.S. dollar from the beginning of this year until Sunday, August 12 but strongly rebounded this week gaining almost 20 percent against the greenback as of Thursday night.
"At this point, the lira is sentiment driven in the market, it is not fundamentally driven," Tran said.
"Assuming that we are looking at one or two years ahead of time, I think the lira should correct the undershooting that we see now, and come back to some kind of more fundamentally justified fair value between $5 - $5.50," he added.
The recent turmoil between Turkey and the U.S. has also added to the sudden decline in the lira against the dollar last week.
"It [lira] was exacerbated briefly by the tensions with the U.S., and particularly the recently imposed sanctions against Turkish ministers. So all of these things combined together to undermine international investors, which is the key element for suspending the Turkish economy," Tran explained.
Turkey and the U.S. are currently experiencing rocky relations following Washington’s imposition of sanctions on Interior Minister Suleyman Soylu and Justice Minister Abdulhamit Gul for not releasing American pastor Andrew Brunson, who faces terrorism charges in Turkey.
U.S. President Donald Trump's decision to double tariffs on Turkey last Friday was another salvo in the growing dispute between the two NATO allies.