The lira swung between gains and losses as traders assessed whether a
doubling of interest rates would be enough to stem capital outflows in
the face of further reductions in U.S. monetary stimulus. Stocks fell.
The Turkish currency strengthened more than 4 percent following the central bank’s midnight rates decision before depreciating as much as 2.4 percent. It climbed 0.5 percent to 2.2407 per dollar at 7:23 p.m. in Istanbul. Yields on two-year benchmark notes decreased 18 basis points to 10.88 percent and the Borsa Istanbul 100 Index (XU100) of shares slumped 2.3 percent.
Governor Erdem Basci is fighting to restore credibility eroded by a currency run that gained speed amid domestic upheaval and a global rout of emerging markets. Prime Minister Recep Tayyip Erdogan, who said yesterday he’s always opposed higher rates, is embroiled in a graft scandal that has ensnared several ministers and the chief executive officer of a state-owned bank. It spooked investors just as the reduction of U.S. monetary stimulus began sucking money out of riskier assets.
“The immediate knee-jerk reaction last night was that the Central Bank of Turkey had in some sense passed an important test,” David Simmonds, the head of currency and emerging-markets strategy at Royal Bank of Scotland Group Plc in London, said in an e-mail. “The broader perspective that having to raise rates to defend your currency is ultimately a very tough place fundamentally to be, so broader macro pressures persist.”
Read more: Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan - Bloomberg
The Turkish currency strengthened more than 4 percent following the central bank’s midnight rates decision before depreciating as much as 2.4 percent. It climbed 0.5 percent to 2.2407 per dollar at 7:23 p.m. in Istanbul. Yields on two-year benchmark notes decreased 18 basis points to 10.88 percent and the Borsa Istanbul 100 Index (XU100) of shares slumped 2.3 percent.
Governor Erdem Basci is fighting to restore credibility eroded by a currency run that gained speed amid domestic upheaval and a global rout of emerging markets. Prime Minister Recep Tayyip Erdogan, who said yesterday he’s always opposed higher rates, is embroiled in a graft scandal that has ensnared several ministers and the chief executive officer of a state-owned bank. It spooked investors just as the reduction of U.S. monetary stimulus began sucking money out of riskier assets.
“The immediate knee-jerk reaction last night was that the Central Bank of Turkey had in some sense passed an important test,” David Simmonds, the head of currency and emerging-markets strategy at Royal Bank of Scotland Group Plc in London, said in an e-mail. “The broader perspective that having to raise rates to defend your currency is ultimately a very tough place fundamentally to be, so broader macro pressures persist.”
Read more: Turkey Rate Increase Stems Lira Decline as Basci Defies Erdogan - Bloomberg
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