Turkish lira hits 6-week high against the dollar

The Turkish lira appreciated against the dollar yesterday amid hints from the Federal Reserve (Fed) pointing to rate hikes as soon as March.

The dollar/ Turkish lira rate dipped to as low as 3.5756 points, the lowest figure since Jan. 4, when the rate began its move towards its historic high of 3.9423 on Jan. 11.

The Turkish lira advanced against the dollar despite the Fed minutes showing "it might be appropriate to raise the federal funds rate again fairly soon" if labor market and inflation figures were "in line with or stronger than their current expectations."

Analysts believe rising risk appetite in global markets plus monetary tightening by the Central Bank of Turkey (CBRT) is supporting the Turkish lira against other currencies.

Deniz Çiçek from QNB FinansBank wrote in a note to clients that the: "The Turkish lira continued to strengthen on account of the ongoing tight monetary policy. The dollar/Turkish lira parity trended down and touched below 3.60 Wednesday afternoon, before ending the day at 3.6070. Following last night's release of the Federal Open Market Committee (FOMC) minutes, the Turkish lira gained as the dollar weakened globally."

In a different client note, Seker Investment said the dollar retreated globally due to the Fed minutes showing a less-hawkish tone than was anticipated.

"Global stocks retreated somewhat midweek; the dollar also declined following the release of the U.S. Fed's minutes of its Jan. 31-Feb. 1 FOMC meeting, which included a less than recently imagined hawkish tone, thus providing almost no support to the possibility of an interest rate increase in March," the note read.

Enver Erkan from KapitalFX drew attention to the hike in the Turkish lira against the dollar after the release of the Fed minutes and underscored that the dollar to the Turkish lira rate might continue to tumble and see 3.55-3.50 in a note. Erkan further stated that parity will see no major upward movement until the referendum on constitutional change on April 16.

Speaking to Turkish news station NTV, Cemil Ertem, the chief consultant of President Recep Tayyip Erdoğan, highlighted that the positive divergence of the Turkish lira might continue and the capital flow into Turkey will increase in the post-referendum period.