The Turkish lira extended losses against hard currencies as traders said state banks had withdrawn support ahead of the central bank’s interest rate-setting meeting on Thursday.
The currency fell as much as 2.2% and was trading at 26.88 per dollar as of 10:30 a.m. in Istanbul. That took this year’s depreciation to more than 30%, the second-biggest loss after the Argentinian peso among emerging-market peers.
Turkey’s Monetary Policy Committee is expected to raise its policy rate for a second consecutive month on Thursday, to 18.25% from 15%, according to the median estimate in a Bloomberg survey. Most economists say policy remains too loose given year-end inflation expectations at higher than 40%.
TURKEY PREVIEW: Central Bank to Continue Pivot With Smaller Hike
State-run banks, which have frequently sold dollars to support the lira in periods of weakness, have not been doing so recently, according to traders who asked not to be named, citing policy. The state banks don’t announce or comment on their interventions in currency markets.
Market Metrics
- 10-year benchmark lira bond yield little changed at 17%
- 10-year benchmark dollar bond yield -6bps to 8.48%
- 5-year CDS flat at 445bps
- Borsa Istanbul 100 Index +2.5% to 6,600.46
- U.S. Treasury 10-year bond yield -2bps to 3.79%
- Brent crude +0.3% to $78.70 per barrel
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