Turkish lira hits highest level in two weeks

Turkey’s lira rose to the highest level in almost two weeks as measures by the central bank and meetings between economy officials and investors eased concern about monetary policy.

The lira climbed 2.1 percent to 4.456 per dollar at 2:32 p.m. in Istanbul, the strongest since May 18 and gaining for a third day. It had hit a record low of 4.92 per dollar last week, prompting the central bank to raise interest rates by 300 basis points to 16.5 percent in an emergency meeting.

On Monday, the central bank announced plans to simplify its monetary policy with a single benchmark rate of 16.5 percent, but still gave the option to lend at higher rates including another rate of 18 percent. Its borrowing rate was set at 15 percent.

Turkish Central Bank Governor Murat Çetinkaya met with investors in London on Monday and Tuesday to explain the bank’s monetary policy and commitment to further rate hikes if needed. He was accompanied by Deputy Prime Minister Mehmet Şimşek.

While the central bank’s decisions over the past week suggest it will behave more independently, Turkish President Recep Tayyip Erdoğan had said on May 14 that he planned to take more control of monetary policy after elections on June 24. Erdoğan has called for lower interest rates to boost economic growth. The central bank’s rate hike was approved by Erdoğan before it was made, Bloomberg reported last week.

Still, investors and ratings agencies remain cautious about Turkey. Moody’s warned about its reliance on short-term capital inflows and foreign lending in a report on Wednesday. It slashed its 2018 growth estimate for the country to 2.5 percent from 4 percent and a prediction for 2019 to 2 percent from 3.5 percent.

In London, Şimşek sought to play down Erdoğan’s comments on interest rates, saying they were made in the run up to elections.