Turkey lira rebounds after rally on new measures

Turkey lira rebounds after rally on new measures

The Turkish lira went up about 30% this week.

Dec 22 Reuters -- The Turkish lira rebounded after a sharp rally this week on the back of new government measures to stabilise the currency, while sentiment towards emerging market currencies and stocks remained largely buoyant despite growing Omicron risks.

Markets were sanguine as investors waited for an interest rate decision from the Czech central bank later in the day, with the crown hovering near a six-week high versus the euro.

According to a 125 basis point hike in November, analysts expect the central bank to raise its key two-week repo rate by 75 basis points to 3.50% and tighten in early 2022, according to a Reuters poll.

Central banks in both developed and developing world have recently switched to tighter monetary policies to rein insurging inflation as the global economy recovers from the severe Pandemic-driven lock-downs last year.

After President Tayyip Erdogan laid out measures earlier this week to guard local currency savings against currency fluctuations, there was some relief for the lira, which has shot up about 30% this week.

The measures did not address the fundamental reason for the depreciation of the currency and rising inflation, according to Goldman Sachs analysts in a recent note.

The lira was steady at 12.5 per dollar after hitting a record low of 18.4 and strengthening to a one-month high of 11.09 - all in a span of two days.

Fears of renewed economic restrictions, problems in China's property sector, the collapse of the lira and a strong dollar have weighed on emerging market assets, making them a laggard among asset classes this year.

The MSCI's EM currency index is up about 0.3% this year, while its equities counterpart is down 6.2%.

The stocks index was up 0.6%, extending the rebound for a second day as investors brushed aside worries about the Omicron coronavirus, which has brought several countries under lock downs and hampered travel.

China Evergrande Group said its risk management committee would engage with its creditors.

China's real estate sector hit two month highs on Tuesday amid growing signs of government support as Beijing tried to prevent a crisis at Evergrande, one of the most heavily indebted developers.

Stock markets in Russia, South Africa, and eastern Europe all rose between 0.4% and 1%, while Chinese stocks closed nearly flat.