“Today’s move is about buying time” Timothy Ash, a strategist at BlueBay Asset Management, told Bloomberg. The central bank needs “to show the market by tightening in a more permanent way. This could be the last chance for the current central bank management to prove themselves.”
The uncertainty over the direction that policy will take after the municipal vote for the end of the Month has dragged lira down over the past three months to more than 6%. Additionally, the risk of increased political risk with the U.S. associated to Turkey’s plans to acquire a missiles system from Russia add to market concerns.
The selling was also exacerbated by signs that local investors are shifting to foreign currencies amid inflationary pressures deteriorating their lira savings. For the week ended March 15, Turkish households and companies shifted into $4 billion dollars of hard currency, the most since 2012, pushing their holdings to $175.8 billion, a new record as well.
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