Azernews.Az

By Bloomberg

The lira gained amid speculation Turkey’s central bank will leave borrowing costs on hold Tuesday and as investors weigh the timing of the first U.S. rate increase since 2006.

Policy makers will probably keep all three interest rates unchanged, according to the median estimates of separate Bloomberg surveys. The Federal Reserve’s rate-setting committee meets Wednesday. The lira rose 0.2 percent to 2.6213 per dollar at 11:03 a.m. in Istanbul.

The currency fell to record lows this year as prospects for higher U.S. borrowing costs heightened concern over the vulnerability of Turkish assets battered by domestic political pressure for deeper rate cuts. A meeting between central bank Governor Erdem Basci and President Recep Tayyip Erdogan last week spurred optimism the government will tone down calls to boost economic growth.

“The lira is likely to benefit from such a decision” to leave rates unchanged, Erkin Isik, a strategist at Turk Ekonomi Bankasi AS in Istanbul, said in an e-mailed note. Still, “risk sentiment toward emerging markets assets is unlikely to strengthen significantly before the FOMC meeting decision tomorrow,” he said.

The Turkish central bank lowered the key rate to 7.5 percent in five moves since more than doubling it to 10 percent in January 2014 to shore up the lira after it fell to a then- record 2.39 per dollar.

The Fed in December said it “could be patient” in deciding when to tighten and Chair Janet Yellen said the phrase meant an increase was unlikely in its next two sessions. The FOMC repeated the language in January, effectively ruling out an increase in March and April. Removing “patient” this month will bring June into play.