Turkish lira gains value against U.S. dollar

Turkish lira gains value against U.S. dollar

The Turkish president also noted that the result of the central bank's independence will be observed following the substantial rate increase that was made a day prior, when the central bank increased its benchmark rate by 625 percentage points, Sputnik reported.

There had been indications from Turkey's central bank that it would raise rates, after inflation came in at almost 18% in August, according to official data.

Financial markets have always been concerned about Erdogan's control over monetary policy, which they say has undermined the central bank's ability to fight inflation, now at 18 percent.

Rabobank emerging markets forex strategist Piotr Matys said that, given concerns over the economy overheating, the slowdown from 7.3 percent in the first quarter could be seen as encouraging.

"Hiking today does get Turkey on the slow road to recovering some monetary policy credibility, and that is critical".

Speculation has been growing that the monetary authority will deliver a sizeable interest-rate increase Thursday after it signalled potential action last week to help stem accelerating inflation.

Inan Demir, an economist at Nomura, said he also expected a 200-250 basis point hike but raised "the non-negligible risk" that the one-week repo rate would in fact remain unchanged.

After rising as high as 6.1442 to the dollar, the lira eased slightly to 6.0768 on Friday.

At 1150 GMT, it stood at 6.18.

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MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.2 percent.

The ban is the latest attempt by the government to boost the Turkish currency and discourage Turkish individuals and businesses from using the dollar in worldwide trade and investment transactions. It had fallen 3 per cent after President Erdogan had called for rate cuts rather than rate hikes and then surged to be 3 per cent up on the day when those calls were spectacularly ignored.

And they say Erdogan remains unpredictable in his policies since he was re-elected this year as president with vastly expanded powers.

In August, annual consumer price inflation hit 17.9 percent, its highest level since late 2003, prompting the central bank to say it would adjust its monetary stance at the September meeting in the face of "significant risks" to price stability.

"Economists and investors are clamouring for the central bank to engage in an aggressive rate hike but they are more likely than not to be disappointed", he said.

The Turkish central bank caught global markets by surprise Thursday as it aggressively hiked interest rates in an effort to strengthen consumer confidence, stem inflation and rein in the currency crisis.

"The central bank is independent and makes its own decisions", said Recep Tayyip Erdogan, while criticizing the bank for "never succeeding in meeting its inflation targets".

On Thursday Turkey banned the use of foreign currencies in the country's property market.

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