Published On: Tue, May 8th, 2018

Turkey cannot stop rise in dollar despite increase in interest rates

Turkey cannot stop rise in dollar despite increase in interest rates

US Dollar Turkish Lira – BusinessTurkeyToday.com

 

The US dollar, which has been steadily rising for three weeks, continues to rise against emerging market currencies with strengthening signals from the US economy. This is a clear indication that interest rates are not sufficient to control upwards movement in dollar in developing countries.

At the beginning of the current year the developing markets were quite happy due to factors such as a healthy growth in the global economy, rising commodity prices, reasonable inflation and a weak dollar. However, things started to reverse in developing countries and the dollar has been rising steadily for three weeks as strong signals from the US economy prepared ground for interest rate hikes and currencies of developing countries entered a downward trend with a hard selling pressure on them. It is commented by experts that with strengthening dollar the period of interest rate cuts in developing countries has ended. Also, moves made by the central banks of countries such as Argentina and Turkey to restrain dollar are insufficient.

On the other hand, the markets are quite convinced FED will increase interest rates in its meeting in June. Due to expectations of increase in interest rates and indications that the US economy is performing better than other regions investors are trying to close their open positions leading to rally around the dollar.





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