Turkish Lira Surges as Erdogan Said to Call Economy Meeting

(Bloomberg) -- Turkey’s lira reversed losses to surge against the dollar on speculation policy makers will take action to support the battered currency.

President Recep Tayyip Erdogan was said to be calling a meeting later on Wednesday with economic officials, including the central bank’s Governor Murat Cetinkaya, to discuss the exchange rate. The currency jumped as much as 1.4 percent to 4.2743 per dollar on bets policy makers may raise interest rates.

Turkish Lira Surges as Erdogan Said to Call Economy Meeting

“I think the market is buying the hope that this meeting will produce a decision to hike,” said Inan Demir, an economist at Nomura International Plc.

The currency reversed an earlier slide of as much as 1 percent to an all-time low on the news, snapping an seven-day losing streak. It has slumped to successive record lows amid a rout sweeping across emerging markets as investors worry that Turkey’s interest rates are too low to anchor the nation’s assets.

Turkey’s central bank raised a key rate by 75 basis points last month, and has moved to boost lenders’ access to dollar liquidity, but the measures have proved insufficient to support the currency. Policy makers are next due to meet on June 7.

The currency has lost more than 11 percent this year as the economy’s large financing needs and the corporate sector’s foreign-currency debt pile make it one of the most vulnerable to the prospect of higher U.S. borrowing costs. A continued sharp depreciation increases the chances of an emergency interest-rate hike, said William Jackson, an emerging-market economist at Capital Economics.

“So far, the lira’s fall doesn’t seem to have caused widespread balance-sheet strains,” said Jackson. “There are significant vulnerabilities in the corporate and banking sectors. This adds to the reasons to expect the central bank to hike interest rates further in the coming months.”

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