Lira Rally Cut Short as Traders Await Erdogan’s View on Jumbo Rate Hike

The lira lost as much as 2.8% against the US dollar on Friday, the worst performance across developing markets which erased about half of the currency’s gains from Thursday. Weaker global sentiment amid uncertainty over US interest rates pushed emerging-market currencies and stocks into the red for the first time in four days.

Concerns over China’s sputtering economy also continued to weigh on emerging-market sentiment. A short-lived rally in Chinese stocks after Beijing’s latest attempt to shore up growth underscored the depth of investor pessimism toward the world’s second-largest economy. The buying-spree is proving short lived, with investors bracing for the risk of more political meddling in monetary policy. Erdogan has chased out three central bank governors since 2019, spurring an exodus of capital that has weighed heavily on the lira.

The lira traded at 26.497 against the dollar, down 2.6% on the day as of 2:30 p.m. in Istanbul. Turkey’s dollar bonds also retreated, with the yield on the note due in 2047 rising 4 basis points to 8.7%. It fell 23 basis points on Thursday.

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