The lira slumped to its weakest level this year after the U.S. Federal Reserve signaled it may consider slowing the pace of asset purchases, cutting risk appetite for emerging-market assets.
The Turkish currency wiped out gains this year and headed for its biggest weekly depreciation in nine months. All emerging market currencies in Europe, the Middle East and Africa retreated against the dollar today.
Several participants at the Federal Open Market Committee’s Jan. 29-30 meeting “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved,” according to the minutes of the gathering released yesterday.
“The move can be observed across the emerging-market universe,” Thu Lan Nguyen, a currency strategist at Commerzbank AG, said in e-mailed comments. “I would attribute this to the FOMC minutes which signaled that the Fed might end quantitative easing sooner than many had expected.”
The lira fell 0.6 percent to 1.7936 per dollar at 1:34 p.m. in Istanbul, declining for a fourth day this week as the Turkish central bank reduced interest rates for a second month, sending yields on the benchmark lira bonds to a record low at yesterday’s close in Istanbul.
The yields on two-year notes rose 2 basis points, or 0.02 percentage point, to 5.66 percent.
The central bank trimmed its overnight borrowing and lending rates by 25 basis points to 4.5 percent and 8.5 percent, respectively, two days ago after reducing them by the same amount in January.
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