Lira weakens to five-month low due to Fed rate hike concerns
The Turkish currency had embarked on a downward trend since the March 30 elections until recently. AFP PhotoThe U.S. dollar has risen to its highest level in five months against the Turkish Lira after minutes from the U.S. Federal Reserve’s July meeting revealed a surprisingly strong recovery in the job market could lead it to raise interest rates earlier than anticipated.
The Turkish currency has tumbled to over 2.1890, reaching the levels it last touched on March 28, two days before the local elections, which had partially cooled down escalated political tension for the pre-election period.
Despite slightly easing to around the level of 2.1835 as of 09:25 a.m., the currency was still traded much higher than a day before, when it was hovering at levels below 2.17.
The lira has embarked on a downward trend since the March 30 elections until recently, as the uncertainties regarding the future of the Cabinet and the ruling party have been causing currency rate fluctuations over the past weeks.
Eyes on Fed
Minutes from the July 29-30 Fed meeting showed policy makers increasingly at odds over how strong the U.S. labour market is and what that means for inflation -- a key issue in planning rate hikes next year.
The intensifying debate signalled an increased, albeit still measured, level of hawkish sentiment in the Fed that could speed up any rate hike.
Easing fears about the geopolitical crisis in Ukraine has fuelled investor optimism ahead of a speech by the head of the US Federal Reserve.
Slow growth, low interest rates and tepid inflation on both sides of the Atlantic will be in focus when heads of the U.S. and European central banks meet today in Jackson Hole, Wyoming.
All eyes will focus on Janet Yellen, the Federal Reserve chair, and Mario Draghi, her counterpart at the European Central Bank, with observers looking and listening for signs of what they plan for interest rates.
Turkish Central Bank Governor Erdem Başçı will also attend the meeting that will be held between Aug. 21 and 23.