EMFed Signal Hits EM FX; Lira off Lows, C.Bank Holds Rates

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Turkey c.bank more hawkish than previous meeting analyst

EM FX index set for worst session in over 1 year

EM stocks index at threeweek low Updates after Turkey central bank decision

June 17 Reuters The lira clawed back some early losses on Thursday after Turkeys central bank held interest rates steady, while an index of emerging market currencies headed for its worst day in over a year slammed by a surprisingly hawkish U.S. Federal Reserve.

The lira briefly erased almost all of its losses on relief that the central bank, under constant pressure from Turkeys President Tayyip Erdogan to ease policy, acknowledged inflation pressures stemming from the liras weakness.

But the central banks statement suggested it was inching towards a rate cut later this year, pushing the lira down again. .

The statement said the current tight monetary policy stance will be maintained decisively until the significant fall in the April inflation reports forecast path is achieved.

TD Securities head of EM strategy, Cristian Maggio, noted the addition of the word decisively, saying it had vanished from recent monetary policy committee statements.

So if one were to find nuances in this statement, one has to conclude that this statement is more hawkish than the previous one.

As higher U.S. interest rates tend to dull the appeal of emerging market assets, investors will want to see whether central banks in the developing world will act to preserve their own currencies yield premium…

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