USD/TRY Back to Highs on Mention of Further Potential Cuts
The Central Bank of the Republic of Turkey (CBRT) cut rates by 100 basis points and leaves the door open for further easing in December.
Immediate response saw the Lira trade at recent lows despite a modest pullback leading up to the announcement.
USD/TRY 5 Minute Chart
Chart prepared by Richard Snow, IG
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Turkish Lira Under Strain as one of the Worst Performing EM Currencies
The Turkish Lira surrendered more than 9% over the last three days in anticipation of the rate announcement which would suggest a rate cut has already been priced in by the market.
USD/TRY Daily Chart
Chart prepared by Richard Snow, IG
Turkish Dilemma
The Central Bank of the Republic of Turkey is currently dealing with inflationary pressures pushing 20%, as per the latest CPI (YoY) figure of 19.89%, well above the 5% target. Traditionally, monetary policy would favor a rate hike in an attempt to rein in inflation but a hike would in turn place more of a burden on the Turkish government to service USD and EUR denominated debts - which have reportedly increased over the short- term. For more on this, read the full report here.
Turkey’s Inflation Data 2021
Source: Tradingeconomics, Turkish Statistical Institute
More on the Emerging Market Front
The South African Reserve Bank (SARB) has its latest policy rate decision due at 13:00 GMT
--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
