Turkish Lira Surges after Central Bank Leaves Key Rate Unchanged

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Turkish Lira Surges after Central Bank Leaves Key Rate UnchangedThe Turkish lira touched a two-week high after the central bank retained its benchmark repurchase rate. The currency rose 0.5 percent to trade at 2.1551 per dollar at Istanbul close after the central bank officials, led by Governor Erdem Basci, retained the repo rate at 8.25 percent.

The central bank, which has been under political pressure to lower interest rates in order to support economic growth, cited geopolitical risks and drought for its decision.

“The lira appreciated as was the expected consequence in the absence of an interest-rate cut,” Emre Balkeser, an Istanbul-based head of trading at Garanti Investment Securities, wrote in an e-mail seen by Bloomberg News. “A rate cut could have weakened the lira at a time when inflationary pressures continued.”

Meanwhile, the India’s rupee volatility fell for the fifth straight day as geopolitical tensions in the Middle East and Ukraine abated, spurring demand for riskier assets. The rupee’s one-month implied volatility, which measures the expected swings in the exchange rate used to set prices to options, plunged 15 basis points or 0.15 percentage point, to 6.63 percent.

The volatility had earlier declined to 6.62 percent, the weakest level since August 1. The rupee was slightly unchanged at 60.45 per dollar.

Israel and Hamas agreed to an Egyptian-spearheaded cease-fire deal to halt the seven-week Gaza Strip conflict. Elsewhere, Russian President said that discussions with his Ukrainian peer over the Ukraine conflict, which has resulted in 2,000 deaths, were “positive”.

India is due to release its second-quarter economic growth in Aug. 29. The gross domestic product expanded 4.6 percent in the first three months of 2014. 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