BUZZ-COMMENT-This could be a turning point for Turkey's lira

Reuters · 09/15/2023 09:46
BUZZ-COMMENT-This could be a turning point for Turkey's lira

- This could be a turning point for Turkey's lira which could benefit from a rise in risk appetite which fuels demand for less safe assets that might draw foreign investors toward a currency that is very high-yielding.

Turkey has returned to a conventional monetary policy hiking interest rates hugely to 25 percent and there are expectations for the central bank to raise interest rates even further.

While the lira hasn't sustained the rise that followed the hike to 25 percent, there have been other big changes in financial markets which favour it. Stocks are rising, with U.S. inflation data hinting at a peak in the tightening cycle, while the European Central Bank signalled that Thursday's rate hike was its last.

UK rates are also expected to peak soon and commodities have boomed, taking crude up by $10/bbl, the CRB index to its highest since September last year, and China's economic stimulus has boosted iron ore beyond a level that targets a return to its record high.

These big changes are potentially sufficient to entice some investors to gamble on a currency that returns over 2% each month, with the prospect of even greater returns should interest rates rise further.

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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)