Turkish Lira Under Pressure Again After Brief Rate Hike Boost
TRY talking points:
- The Turkish Lira was boosted Wednesday by a sharp increase in Turkey’s benchmark interest rate.
- However, the advance is already reversing and USDTRY is heading higher again.
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Renewed strength for USDTRY
The Turkish Lira is weakening again in Europe Thursday after a brief lift from a decision by Turkey’s central bank to hike its benchmark interest rate to 16.5% from 13.5% in an attempt to arrest the currency’s steep slide lower. As a result, USDTRY is again challenging the 4.7 level after easing to a low of 4.5392 Wednesday in the wake of the rate increase.
USDTRY Price Chart, Daily Timeframe (Year to Date)
The Lira’s latest problems stem from a comment by Turkish President Recep Tayyip Erdogan that he expects to assert more control over economic and monetary policy after the June 24 elections in the country. That has raised concerns about the central bank’s independence.
Moreover, there are worries that the central bank may leave rates unchanged at the next meeting of its monetary policy committee on June 7, rather than raising them further. While economists argue that still higher rates are needed to combat an inflation rate of almost 11% year/year, Erdogan has said he wants looser monetary policy to boost the economy even though it grew by a hefty 7.4% last year.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.