'Dovish' central bank causes lira slide - FT

The Turkish central bank’s decision to hold interest rates stable has unnerved investors and raised doubts about policymakers’ ability to surmount the serious economic challenges facing the country, Adam Samson wrote for the Financial Times on Thursday.

The bank announced interest rates would remain at 24 percent on Thursday, a decision that some have viewed as contradictory to a March 6 statement promising further tightening.

By 9:10 p.m. local time (GMT +1) the lira had fallen to 5.94 against the dollar from around 5.89 at the beginning of the day.

Turkish President Recep Tayyip Erdoğan’s unorthodox economic views hold that interest causes inflation, and his objections to raising interest rates have triggered lira slides in the past.

Cristian Maggio, head of emerging markets strategy at TD Securities in London, called the central bank’s inaction on Thursday a “dovish signal” that has been received badly by the markets.

Meanwhile, new data has revealed that the central bank’s foreign currency reserves have continued to fall, dropping by $1.8 billion last week.

The lira fell by 4 percent against the dollar in late March, after news reports indicated the central bank’s reserves had sharply fallen to $28.5 billion in the first two weeks of the month.

Later news reports indicated the bank’s foreign reserves have continued to fall since then, pushing the lira’s value further downward.