The decision to increase interest rates has been made by the Fed, ending the year-long anticipation in the market and resulting in a 2 percent rise to the Turkish lira just three days later. The lira had been under selling pressure as markets awaited the Fed's impending decision.
Before the Fed meeting, analysts estimated that the dollar-to-lira parity might exceed three or even climb up to 3.15, which pressurized assets in the Turkish lira. Contrary to analysts' expectations, the Fed increased its indicative interest rates by 25 base points and the dollar-to-lira exchange rate dropped down to 2.91.
While the US dollar rose against the currencies of other developed countries in the wake of the Fed's decision, those currencies still maintained a strong position against the dollar. The U.S. dollar increased 2 percent against the euro, yen and sterling and decreased 1percent against the Mexican peso, Indian rupee and Indonesian rupee. While the transactions of the last three days are examined, the Turkish lira showed a higher increase than the currencies of other developing countries. The dollar-to-lira parity was over 2.99 before the Fed announced its decision and declined for three consecutive days to 2.9054; which translates to a drop of nearly 2 percent in the dollar-to-lira parity compared to the parity prior to the Fed's decision.
