Turkish Lira Hits Record Low After Fed Rate Hike Speculation

The lira slid toward a record as speculation the U.S. is moving closer to raising interest rates outweighed attempts by the Turkish central bank to support the currency.

The lira retreated 1.5 percent to 2.6403 per dollar by 1:43 p.m. in Istanbul, the second-biggest decliner among 24 emerging-market peers. Stocks fell to the lowest level in almost three months and government bonds decreased, sending yields higher for a fourth day.

Turkish central bank Governor Erdem Basci is struggling to stop the lira from falling to repeated records as government pressure to deepen interest-rate cuts stoked speculation he will lose his autonomy over monetary policy. The bank reduced the amount of local-currency offered in auctions of one-week repurchase agreements in the past five days among measures to shore up the currency as more Federal Reserve officials make a case for gradually raising interest rates.

“The lira has been suffering from a rising country-risk premium due to intensifying concerns of political pressure on the Central Bank of Turkey,” Gokce Celik, an economist at Finansbank AS in Istanbul, said in e-mailed comments. Government calls to ease policy “are likely to continue, especially against a backdrop of weak growth outlook.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza