Will Turkey's Rate Hike Be Enough to Calm Lira Traders?

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Once confidence in a currency is lost, it’s hard to get it back. Turkish central bankers are trying hard to hold the public’s confidence in the lira by hiking interest rates to 24%. At The Wall Street Journal, David Gauthier-Villars explains the central bankers’ efforts to maintain control. He writes:

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The monetary-policy decision could help ease investor concerns over the central bank’s independence from Turkey’s President Recep Tayyip Erdogan, whose call for lower rates earlier Thursday had weighed heavily on the lira.

“This was much bigger than expected. It sends a signal to the market and it’s a good signal,” said Kevin Daly, portfolio manager for emerging-market debt at Aberdeen Standard Investments. “It gives you some confidence in the lira that you might be able to buy this thing again.”

The central bank has been under heavy pressure from international investors to raise rates to tame spiraling inflation and stabilize the lira, which has lost about 40% against the dollar this year amid growing investor concerns over the ability of Turkish corporation’s ability to repay hefty foreign currency debt.

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E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.