The Turkish lira rebounded strongly after the central bank said it would schedule an extraordinary policy meeting on Tuesday to evaluate recent developments and take necessary measures to ensure price stability.
The central bank said the decision would be published midnight local time on Tuesday. The news appeared to be interpreted as a signal that Ankara would raise interest rates aggressively, sending the lira 2.3% higher against the U.S. dollar by late New York trading. One dollar bought 2.2832 liras late Monday, down from 2.3367 liras late Friday.
Analysts said the failure to deliver a significant increase in interest rates could spark a broad selloff. “They have to hike…and aggressively,” said Tim Ash, emerging-markets economist at Standard Bank in London.
Mounting expectations that the U.S. Federal Reserve will begin scaling back its bond purchases at a faster clip has hit developing economies, which for years have been buoyed by the high tide of cash generated by the Fed’s stimulus program. The pressure has weighed heavily on the currencies of Turkey and South Africa, and spread to developing nations such as Argentina, which faces rising inflation and social unrest, as well as Russia and Mexico.
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