The Turkish Lira tumbled further against the Pound, wiping out all of the gains it made on Tuesday night after the Turkish Central Bank announced a huge hike to the nation’s interest rate.
Emerging market currencies continue to be hammered as investors jump ship from riskier assets. The rout began after China posted data which showed that manufacturing activity in the world’s second largest economy faltered. Data released early in Thursdays session showed that the China’s manufacturing index which gauges activity in the sector fell to a six-month low of 49.5 in January, a figure below 50 indicates contraction.
“Risks are incredibly high as we enter a new and alarming phase of what is looking more and more likely to become an emerging market crisis,” said Rand Merchant Bank.
The Turkish Central Bank tried to restore confidence by taking action. On Tuesday night the Bank doubled its key interest rate to 12%. The plan worked briefly, but then the US Federal Reserve announced a further reduction of its monthly quantitative easing programme. It reduced its monthly asset purchase by another $10 billion to $65 billion.
The move by the Fed was widely expected but managed to swamp the impact of the Turkish Banks rate hike. The Fed move also heavily impacted the South African Rand, Indian Rupee, Russian Ruble and the Hungarian Forint which fell to a two-year low against the Euro.
The Lira is forecast to remain under pressure for the foreseeable future as the market will return its attention to the political issues in Turkey. More volatility is expected due to upcoming elections in March and continued worries over the nations financing requirements.
Current Turkish Lira (TRY) Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,Turkish Lira,3.7378 ,
US Dollar,,Turkish Lira,2.2685 ,
Euro,,Turkish Lira,3.0880 ,
Australian Dollar,,Turkish Lira,1.9870 ,
[/table]
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