Turkey’s currency rose nearly 1 cent after the country’s central bank chief, Recep Tayyip Erdogan, was fired as the main force in pulling the lira from historic levels.
The lira traded around 8.4 against the US dollar at the start of the Asia-Pacific trading day, two market participants said. It is a sign of a sharp decline around TL7.22 from Friday’s closing level.
The volume in the lira-dollar pair is usually thinner at a time when most trading desks are still closed. However, a currency-trading bank source said it had already a turnover of hundreds of millions of dollars even at the earliest.
The removal of Nasi Agbal, announced early on Saturday, came as a shock to many local and foreign investors, who praised the authorities’ decision to move Turkey towards a more monetary monetary policy.
Edward Al-Husseini, a senior rates and currency analyst at Columbia Threadnadel, said: “It is painful to be unsure of what was the right macro policy in a nutshell.”
The appointment of Agbal in November, which was part of a broader economic leadership shake-up, triggered a sharp rise in the lira after the currency hit historic historic lows. The lira was at one stage the best-performing emerging-market currency of 2021 and has recovered almost a fifth of its value around the US dollar, which struck on November 6.
Last Thursday, the lira rose with a 2 per cent rise in interest rates, more than double the expectations of economists, and rose to overs.7575 per cent last year.
Investors have called for tighter monetary policy in Turkey to curb inflation above 15 per cent and curb the strong influx of foreign investors.
Ehsan Khoman, head of emerging markets research at MUFG Bank in Dubai, said Agal’s leadership and the central bank’s prudent move had played a “crucial role” in maintaining confidence in legal and Turkish assets.
Traders and analysts are now worried that Erdogan’s decision to install Sahap Quasioglu in the role could quickly erode the benefits of Agbal’s short tenure. Kavasioglu is a well-known professor of banking and the ruling judge and former MLA of the Vikas Party.
The new head of the central bank wrote in a column in the Islamist newspaper Yeni સફaf last month that “raising interest rates will indirectly increase inflation” – a view that contradicts most modern macroeconomic principles and one that Erdogan also introduced. , anti-noise rate.
Robin Brooks, chief economist at the Institute for International Finance, said Turkey now risked an influx of “large” investors that would put pressure on the lira.
Goldham Sachs warned on Sunday that it sees “significant risks of a weak near-term inconsistent move in the lira”.
“There could be big surprise market results and I think we can expect a fairly aggressive fall in the lira,” added Paul McNamara, GAM’s investment director.
The central bank will continue to use monetary policy instruments effectively in line with its main objective of permanently reducing inflation, Cavsioglu said in a statement on Sunday.
The sudden change in the leadership of Turkey’s monetary policy comes at a momentous moment in emerging markets, which have seen the U.S. And in other developed markets, borrowing costs are under pressure. Last week, both Russia and Brazil joined Turkey in rising interest rates because they wanted to keep an eye on inflation.
Additional reporting by Katie Martin.
