The Central Bank of Turkey’s chunky 300bp rate hike last week, and pledge to use only its one week repo rate as the nut with which to adjust monetary policy, certainly stemmed the fall of the lira, but left it range bound in a limbo state — with investors uncertain as to where things would go next.
It was not until deputy prime minister Mehmet Simsek and central bank governor Murat Cetinkaya came to London this week that the lira regained value against the dollar, suggesting that like the rest of us at a point of crisis, what investors wanted most was the human touch.
Simsek and Cetinkaya met more than 100 investors in a 13 hour long series of back-to-back meetings. That certainly showed commitment. As regular commentator and BlueBay economist Timothy Ash wrote on Twitter, it “shows the impact of coming to London and giving institutional investors a bit of TLC, as opposed to a total kicking”.
Investors were happy to bask in the warm glow of face-to-face contact as the pair talked up Turkey’s reform agenda, judicial and labour market reforms, as well as reassuring the buy side that rates could go up again, should the May inflation numbers show noticeable acceleration.
The lira appreciated 9% against the dollar this week, dragging equity and local bond prices with it. And while the CBRT’s response clearly stopped the rot, investors took the greatest comfort in the hands-on approach of the country’s policy makers.