CBRT Raises Rates, Pushing Turkish Lira Up

The Turkish lira has aggressively rallied this morning after the Central Bank of the Republic of Turkey raise the one-week repo rate by +100 bps to +17.75%.

Over 60% of FX dealers were expecting a tighter monetary policy, but by +25 to +50 bps.

USD/TRY has fallen to a one-week low of $4.4570 (-1.83%), down from $4.5750 before the decision.

Today’s hike comes a couple of weeks after the CBRT raised rates and switched focus to the one-week repo rate to ease lira weakness.

Note: The lira had hit new record lows before the increase because the central bank was not responding to TRY’s fall and investors were doubting its independence from President Erdogan’s government.

EUR/TRY is trading atop of €5.5300, down -1.44%.

Is this a temporary solution?

The reason why it’s a temporary recovery and not a more permanent one is because the major issues behind lira’s weakness are Turkey’s current-account deficit and external financial need.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell