World Bulletin / News Desk
The Turkish lira on Tuesday rallied to its highest value in over three months against the dollar with an increase of one percent.
The U.S. dollar started Tuesday at 2.11 to the lira (US$1 = 2.1122 turkish lira). After the country's March 30 local elections which resulted in a ruling AK Party victory, and hints from Turkey's central bank governor Erdem Basci Monday over a delay in cutting interest rates, the dollar came to 2.09 (US$1 = 2.0915 Turkish lira before markets closed).
Basci said Monday that "the central bank's strategy is to increase interest rates suddenly to the maximum level as it necessitates then, if conditions improve, decrease the rate step-by-step".
Turkey's ruling AK Party received 45.56 percent of the vote in nationwide local elections.
Cuneyt Paksoy, a strategist at Turkey-based Saxo Capital said the dollar has lost value against Turkish lira due to cash inflow to the market before and after the election.
"The Turkish central bank's governor said that the bank wants to decrease interest rates but Turkish inflation and developments overseas are important signals for that, and the governor’s comments are vitally important for the independence of the central bank."
Paksoy also said that any movements in the U.S. and European stock exchanges as well as tensions between Ukraine and Russia will affect foreign exchange rates in Turkey.
Paksoy added that if the European Central Bank made a decision about monetary expansion, that this would support Turkey's growth and the Turkish central bank would ease its decisions regarding interest rates.
On January 28, the Central Bank more than doubled its borrowing rate from 3.5 percent to 8 percent, and raised the lending rate from 7.75 percent to 12 percent.
After the central bank´s interest rate hikes, the cost of borrow has increased.