turkish interest rates...puzzled

scatmanjohn

My mate came back from turkey and told me the savings rates in turkey are 18%.

I said he must have the wrong end of the stick.

So i checked here:
http://www.hsbc.com.tr/eng/retail_banking/interest_rates_and_fees/interest_rates.asp#2

indeed they are 18%

Whats going on here, i know i am missing something here, but what?

gt94sss2

scatmanjohn wrote: »

i know i am missing something here, but what?

The inflation rate in Turkey..

Regards
Sunil

scatmanjohn

gt94sss2 wrote: »

The inflation rate in Turkey..

Regards
Sunil

that will put a spanner in the works i think.

cheers

ManAtHome

But the Turkish Lira has gone up against the pound by a couple of percent over the last year (looked like it was going to tank this time last year), so you could have probably pulled 15% after conversion charges over the last year (if you could have opened an account...)

dipsomaniac

high interest rates = high inflation = volatile exchange rate. what you gain in interest you could lose (plus more) in converting lira back to base currency.

unless you are talking about speculating with £millions the spread between buying/selling will also be huge.

no such thing as a free lunch - except when pret are opening a new store.

dipsomaniac

the currency can strengthen but the odds are that it is weakening otherwise the interest rate wouldn't be so high.

risk = reward. speculating on a currency is high risk and could result in losing all of your capital. it is only a 'saving' rate in turkey.

ManAtHome

I thought that last year, and "normal economics" would have suggested a drop of 15-20% so should have been well over 3 to the pound by now. From Oanda, was 2.75 a year ago, now around 2.69 (low point was 2.90 last September) - is it the "potential Euro" effect that's keeping it up?