ECONOMY

Fed decision helps lira to 3-month high

ISTANBUL (Reuters) – The Turkish lira strengthened to a three-month high against the dollar yesterday as the central bank showed it has regained market confidence and the US Fed halted its two-year raising cycle. Turkey’s currency firmed more than 1 percent to 1.4450 in interbank trading from Tuesday’s close of 1.4670. The US Federal Reserve’s decision to halt its two-year rate hike cycle has strengthened emerging market currencies such as the lira. «Generally, Turkish markets met the Fed’s decision to hold rates positively. The dollar saw some selling and the US bourses closed lower yesterday,» said a banker. The lira has regained some 20 percent of its value since late June when the currency fell to its lowest levels against the greenback as higher-than-expected inflation figures scared investors out of the market. «The main point is that the central bank has regained the confidence of the market and the government has issued strong words that it will stick to CPI targets,» said Simon Quijano-Evans, analyst at Bank Austria-Creditanstalt. Last week, Turkey’s Statistics Institute released slightly higher-than-expected July inflation figures, with CPI rising 0.85 percent month-on-month and 11.69 percent year-on-year. «The lira was surprisingly resilient despite the CPI increase, but that is because the central bank has said that if they see anymore pressure on CPI, they will not hesitate to hike rates,» said Quijano-Evans. Turkish stocks also rose 2.81 percent yesterday, despite expectations of a globally negative market after Fed Chairman Ben Bernanke issued warnings about the strength of the US economy on Tuesday.