(Bloomberg) -- The lira surged after Turkey's central bank hiked interest rates more than forecast, driving home Governor Naci Agbal's pledge to tame inflation and defend the currency.
The Turkish currency rallied as much as 2% to 7.3525 as of 2:03 p.m. in Istanbul, its biggest intraday gain in more than a week. The central bank raised rates by 200 basis points to 19%, compared with economists' forecasts for an increase of 100 basis points.
The lira has taken the worst hit in emerging markets from rising U.S. Treasury yields, and the currency's more than 8% drop since mid-February has spurred calls for Agbal to backstop the market with higher rates. Turkish inflation accelerated for a fifth month in February as surging oil prices compounded the impact of lira weakness.
Turkey's stocks benchmark, the Borsa Istanbul 100 Index, was up 0.6%, and the Borsa Istanbul Banks Index rose 3.1%.
Since his appointment last year, Agbal has lifted the headline rate by 875 basis points, delighting investors with a return to more hawkish policy and helping make the lira the best carry-trade currency this year behind the Russian ruble.
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