(Bloomberg) -- Turkey's central bank hasn't boosted the lira, but it may have saved it ahead of elections.
While the currency quickly erased a jump after policy makers raised a key rate more than expected on Wednesday, it is still beating peers this week. The central bank has provided a buffer from the torrent of bad news that is hurting emerging markets, from higher U.S. Treasury yields to rising oil prices.
The currency's recent outperformance against high-yielding peers will continue, says Henrik Gullberg, a strategist at Nomura International Plc. Investors are likely to interpret Wednesday's central bank decision as a sign that policy makers won't hesitate to backstop the currency with higher rates ahead of elections in June, he said.
The lira has now recovered over 2 percent after plunging to a record low earlier this month, though bears think the currency may stay under pressure because of an overheating economy. It strengthened a third day against the greenback Thursday, gaining as much as 0.4 percent to 4.0663 per dollar.
“This rates move should provide a short-term stabilization of the lira ahead of early elections,” said Kiran Kowshik, a strategist at UniCredit SpA. “The currency will resume depreciation at some point in the second half. But near-term gains are likely.”
To contact the reporter on this story: Constantine Courcoulas in Istanbul at ccourcoulas1@bloomberg.net.
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee, Keith Jenkins
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