Turkish Lira is in free fall against dollar, as country’s waning economic prospect is keeping lira on back foot.
Turkish Central Bank, few weeks back announced that it might be taking steps to prevent Lira in falling further.
- However last week’s punitive measure by central bank, has excited the dollar bulls further and they pushed Lira to new all-time low against dollar. Bank increased interest paid on Lira required reserve and cut FX deposit lending rates by 50 basis points. Lira traded as high as 2.7432 in post announcement trading.
Lira is trading at 2.724 against dollar as of now, after making high at 2.7371 in today’s trading.
Central bank’s dilemma –
- On one hand Turkish central bank is facing higher inflation (7.6% as of latest), falling Lira (down 17% against dollar YTD) and political pressure to not to move with any major rate hike till the June election on the other.
It will be tough for central bank to sit tight and not respond, should Lira depreciate further. Dovish comments from FOMC this week could provide some relief to Turkish Lira.
Turkey’s election is scheduled for June 7th 2015, to elect 550 members of Grand National Assembly.
The material has been provided by InstaForex Company – www.instaforex.com