The Turkish currency appreciated the most in more than two weeks after the central bank resisted government pressure to lower interest rates.
The lira appreciated 0.9 percent to 2.1308 per dollar at 3:18 p.m. in Istanbul, the biggest advance since April 8. It has gained 9.6 percent in the past three months, the most among 24 emerging-market currencies tracked by Bloomberg. Yields on two-year notes dropped nine basis points to 9.75 percent.
The central bank’s monetary policy committee kept the benchmark repurchase rate at 10 percent, in line with all 16 economist estimates in a Bloomberg survey. “The tight monetary policy stance will be maintained until there is a significant improvement in the inflation outlook,” the bank said after today’s decision, the first since Prime Minister Recep Tayyip Erdogan urged central bank Governor Erdem Basci on April 4 to cut borrowing costs to spur the economy.
“We consider the move to be very assuring, supporting currency stability and likely to help narrow the credibility gap in the coming months,” Tevfik Aksoy, chief economist for Europe, the Middle East and Africa at Morgan Stanley in London, said in e-mailed comments. “This was an excellent decision.”
Policy makers also left its overnight borrowing and lending rates on hold.
The central bank more than doubled its benchmark policy rate to 10 percent in January after the lira slumped to a record of 2.39 against dollar. Basci said on April 7 that policy makers may take “measured steps” to ease access to credit.
To contact the reporter on this story: Selcuk Gokoluk in Istanbul at email@example.com