Turkish Lira Reverses Losses as Central Bank Vows to Take Steps

© Reuters. Turkish Lira Reverses Losses as Central Bank Vows to Take Steps

(Bloomberg) — The Turkish lira reversed a drop to a record low after the central bank said it was monitoring markets and would take necessary steps, a sign policy makers are getting closer to taking action to stem a rout.

The central bank’s governor will meet Recep Tayyip Erdogan, according to local television reports on Wednesday, after Turkey’s president said he plans to take more responsibility for monetary policy following elections next month. The lira has been one of the currencies hardest hit by an emerging-market selloff this year amid concern the nation’s interest rates are too low given a current-account deficit and double-digit inflation.

The central bank “is closely monitoring the unhealthy price formations in the markets. Necessary steps will be taken, also considering the impact of these developments on the inflation outlook,” the Ankara-based monetary authority said in a statement on its website.

“Now we just have to see whether ‘necessary’ is the same to the central bank as it is to the market,” said Henrik Gullberg, a strategist at Nomura International Plc. “The market needs a circuit breaker, that circuit breaker can only be a prohibitively aggressive rate hike.”

The traded 0.8 percent higher at 4.4133 per dollar, after earlier slumping as much as 1.2 percent to a record 4.5010. The yield on local currency notes fell 16 basis points to 14.55 percent, after earlier surging to a record 14.94 percent.

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