Turkish lira clobbered in late trading
Possible moves by Turkish President Erdogan to push down interest rates pose risks for the currency.
The Turkish lira got clobbered in late trading as the central bank bought local-currency bonds aggressively. “The central bank now holds more than this year’s 15 billion-liras target, which the regulator said it increased in January in an effort to improve liquidity in the market,” Bloomberg News reports. “The pace of purchases is fueling speculation that the central bank may be moving to drive borrowing costs lower even as it tightens short-term money-market rates, which it has increased by about 200 basis points this year in an effort to support the lira.” The risk to the currency is that Turkish President Erdogan will try to push down interest rates to garner popular favor in anticipation of the April 16 referendum on constitutional changes to strengthen the presidency.