Turkish lira weaker a day before crucial rate decision

Shafaq News/ Turkey’s lira was weaker on Wednesday, a day before a crucial interest rate decision by the central bank, remaining around levels it rallied to last week on expectations of a sharp rate hike.

The lira stood at 7.73 against the dollar at 0729 GMT, down from Tuesday's close of 7.7150. Earlier, it slipped as low as 7.76 and has remained within the 7.7-7.8 level for much of this week, down some 24% in the year-to-date. According to Reuters Data

The currency’s rally, which saw it firm some 12% to its strongest level since Sept. 25, was initially sparked last week by the departure of the central bank governor and the finance minister.

Market-friendly comments from President Tayyip Erdogan also led to optimism, mainly among international investors.

Markets are now focused on the rate decision at the first meeting under new central bank governor Naci Agbal, who is seen as taking a more orthodox approach to policy.

The bank is expected to hike its policy rate to 15% on Thursday from 10.25% currently, according to a Reuters poll.

The decision to keep the policy rate steady in October while raising the top rate of the interest rate corridor had accelerated the lira’s decline to a record low of 8.58.

Investors and depositors have dumped the lira this year in part due to negative real onshore rates, as well as concerns over the central bank’s depleted reserves and geopolitical tensions.