Foreign exchange and commodities – interest rate cut weighs on Turkish lira – economy

The US currency was supported on Thursday by speculation that interest rates in the USA would continue to rise sharply. Accordingly, the euro fell sharply. The common currency was down 0.5 percent in the evening at $ 1.0089. As can be seen from the minutes published by the Fed on Wednesday evening, the monetary watchdogs have not yet indicated any preference as to whether they want to take another unusually large interest rate hike of 0.75 percentage points in September or leave it at a hike of half a point. According to City Index analyst Matt Simpson, the dollar should be on the upswing for now as interest rates continue to rise.

The lira depreciated after a surprise interest rate cut by the Turkish central bank. The exchange rate temporarily fell by one percent to 18.14 lira per dollar. The Turkish currency is now only two percent above the record low it reached in December. Despite inflation escalating in Turkey, monetary authorities decided to cut the key monetary rate by a full notch to 13 percent. However, inflation had recently continued to skyrocket. In July, it reached 79.6 percent, the highest level in 24 years. In such a situation, loosening the interest rate reins contradicts conventional economic doctrine. Such an unorthodox approach is supported by the influential Turkish President Recep Tayyip Erdogan, who describes himself as an enemy of interest rates.

The significant drop in crude oil inventories in the US drove the oil price higher. Brent crude rose 3.2 percent to $96.61 a barrel. According to EIA data, US crude stocks fell by 7.1 million barrels last week. Analysts had only expected a drop of 275,000 barrels.

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