Turkish Lira Plunges Further after Key Inflation Gauge Drops

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Turkish Lira Plunges Further after Key Inflation Gauge Drops The Turkish lira extended its losses for the fifth day, touching a record low after a key official inflation gauge fell more than the market had expected, fuelling speculation policy makers may reduce interest rates very soon.

The lira fell 0.8 percent to trade at 2.5368 versus the dollar as of 5:54 p.m., Istanbul time, after touching 2.5383. The yield on the 2-year government bonds dropped 13 basis points to steady at 8.39 percent.

The core consumer-price index, which is adjusted for some items such as tobacco, energy, gold and food, fell to 7.73 percent last month, compared with 8.63 percent in January, according to a report by Turkstat.

“The fact that core CPI has improved below 8 percent fuels our concerns as it is the perfect excuse to revive the political pressures for lower rates,” Ipek Ozkardeskaya, a Geneva-based currency strategist at Swissquote Bank AS, told Bloomberg News. “We wouldn’t be surprised to hear additional comments from policy makers in favor of lower rates.”

Meanwhile, the South Korea’s won rebounded after the Reserve Bank of Australia caught the market off guard Tuesday by leaving interest rates unchanged, lowering the prospects of additional monetary easing in Seoul.

The won advanced 0.4 percent to trade at 1,096.31 per dollar at 3 p.m. Seoul close, after earlier dropping by up to 0.3 percent. The currency touched 1,095.56, its highest level since Feb. 16.

The RBA retained the overnight borrowing rate at 2.25 percent, though it said more cuts are needed to boost economic growth. The move boosted the won, while South Korean bonds plunged. The yield on the 3-year sovereign bonds fell one basis point to 1.99 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com