The Turkish lira has strengthened after the central bank raised one of its interest rates to support the currency.
Bank officials also said they would, if necessary, take further steps to stop the lira from falling.
The overnight lending rate was put up to 7.25 percent from 6.5 percent. Raising that rate increases the real interest rate on lira assets and makes them more attractive to foreign investors, supporting the currency. Whether that in itself will be enough remains to be seen.
The move was in response to capital outflows that have knocked the value of the lira down as much as nine percent against the dollar, despite attempts by the central bank to prop it up.
The lira has been weakened by uncertainty over the US Federal Reserve’s bond-buying stimulus programme and by widespread public demonstrations against the government last month.
The bank kept other rates – such as its one-week repo policy rate and its benchmark borrowing rate unchanged.
It is a major reversal by the central bank, which two weeks ago was railing against what it called the ‘interest rate lobby’ which it said was conspiring to manipulate interest rates.
At that time it steadfastly refused to use a shift in interest rates to support the lira.
Prime Minister Tayyip Erdogan has long championed low interest rates, fearing an economic slowdown ahead of elections, but the central bank has already burned through $6.6 billion (five billion euros) of its reserves to try and boost the lira, a policy it cannot pursue indefinitely.
Reassurances from Fed Chairman Ben Bernanke last week over the pace of the US central bank’s plans to withdraw monetary stimulus have boosted sentiment in emerging markets, lending support to the lira in recent days and taking some pressure off Turkey’s central bank.
It nonetheless followed other emerging markets in lifting rates. Last week, India joined Brazil and Indonesia in raising some of its interest rates to try to prevent a rout of its currency.
Copyright © 2014 euronewsMore about:
- 1Hungary gets a bitcoin cash machine as the virtual currency craze reaches Budapest
- 2Swiss put the block on Russian sanction-busting
- 3Scottish independence vote raises questions for whisky producers
- 4New French economy minister under fire in first week in job
- 5Making fortunes with Lego, legally and illegally
- 1#ن: How an Arabic letter was reclaimed to support Iraq’s persecuted Christians | euronews, world news
- 2Ellen MacArthur: making waves on a journey to a circular economy | euronews, the global conversation
- 3Japan sounds bluefin warning, calls for 50% catch cut | euronews, world news
- 4Israel announces it will seize 400 acres in West Bank | euronews, world news
- 5Hoverbike on the horizon | euronews, hi-tech
- 6China executes eight Muslims convicted of terrorism | euronews, world news
- 7Putin T-Shirts flying off the shelves at Moscow megastore | euronews, world news
- 8Everything you need to know about the Ebola virus | euronews, world news
- 9Ukraine accuses Russian aid convoy of stealing factory equipment | euronews, world news
- 10Massive Swedish forest fire is declared a national emergency | euronews, world news
- 11EU leaders name Donald Tusk European Council president | euronews, world news
- 12Man, 27, fails in suicide bid after tigers reject chance to eat him | euronews, world news
- 13Risk of fresh ash cloud threatens European air travel | euronews, world news
- 14Canada sends hilarious barb to Russia over Ukraine ‘incursions’ | euronews, world news
- 15Iceland warns Europe’s airlines of possible volcanic eruption | euronews, world news
- 16Beyond the subconscious | euronews, futuris
- 17Bardarbunga volcano in Iceland continues to rumble | euronews, world news
- 18Poland wants compensation from the EU for Russian import ban | euronews, world news
- 19EU’s Russia sanctions doing more harm than good says Hungary’s PM Orban | euronews, world news
- 20Greek farmers suffer in economic war between Russia and EU | euronews, economy
Wires > Business
- 09:14 CET Blavatnik’s Access Industries bids to buy all of Perform
- 09:01 CET Spain’s Caixabank eyes 150 million euro synergies from Barclays…
- 08:56 CET Macau gambling revenue declines for third consecutive month
- 08:52 CET Germany posts budget surplus as pressure rises to boost growth
- 08:42 CET UK businesses in favour of a new deal with European Union – survey
- 08:05 CET China gives Microsoft 20 days to provide explanation in anti-trust…
- 07:52 CET South Africa’s Bidvest FY profit up 11 percent, lags consensus
- 07:41 CET China manufacturing slowdown ripples through region