Turkish lira rallies against dollar after Fed holds rates

Diminishing U.S. dollar concerns may provide a boost for Turkish assets: analyst

Turkish lira rallies against dollar after Fed holds rates


 The Turkish lira rallied against the U.S. dollar Thursday, after U.S. Federal Reserve Board Chair Janet Yellen indicated that an interest rate rise might not come soon.

The lira was holding at about 2.57 to the dollar Thursday, down from levels close to 2.64 earlier this week.

Yellen told a press conference late Wednesday in Washington that there would be no interest rate rise in the U.S. in April, and that the one projected for June might also be delayed.

Ziraat Securities' economist Bora Tamer Yılmaz said in a note Thursday that the rate rise might not come before September, and that this was good for the lira and Turkish stocks.

"Diminishing the U.S. dollar concerns may provide a boost for Turkish assets," Yilmaz said.

The lira has lost more than 10 percent of its value against the dollar since January, as worries about a Fed rate rise soured investor sentiment.

Timothy Ash, an emerging-markets analyst at Standard Bank, told The Anadolu Agency that the dovish statement from the Fed was the preferred outcome for emerging-market currencies, as a more hawkish tone could have spurred capital flows out of emerging markets.

The Federal Reserve did change its language on interest rates in its statement released before Yellen's speech. The removal of the word "patient" from the statement was a signal, noted by Yellen previously in testimony before Congress on Feb. 24, that a rate rise would be on the Fed's agenda within two months.

But Yellen was careful to temper this indication in her speech: "Removing the word 'patient' does not mean we will be impatient" to raise rates, she said.

Meanwhile, the U.S. Dollar Index, which measures the strength of the dollar against six other major currencies, also dropped to 96.75 from 99.68 after Fed's decision came out. It is at about 98.50 Thursday.

Separately, the Central Bank of the Republic of Turkey left all key interest rates unchanged Tuesday, one day before the Fed's statement.

The one-week repo rate stayed at 7.50 percent, and the overnight lending rate at 10.75 percent.

The Turkish central bank said in a statement Tuesday: "The ongoing cautious monetary policy along with prudent fiscal and macro-prudential policies are having a favorable impact on inflation, especially inflation excluding energy and food (core inflation indicators- excluding energy and food products). Yet, uncertainty in global markets and elevated food prices necessitates maintaining the cautious stance in monetary policy. Accordingly, the committee decided to keep the interest rates at current levels."

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