The Turkish Lira had a major downturn as the central bank reduced interest rates. The Lira dropped 2% against the dollar as the benchmark rate was lowered by 50 bps to 5.75%.
Turkey’s economy has been flourishing as it saw $4.67 billion of foreign inflows in the first 4 months of 2011.
The Lira has been taking dives this last decade post baking crisis of 2001-2002. The Lira fell 1.6% in 2009 after the central bank cut rates from 13% to 11.50%.
The Lira was long regarded as an income boosting currency as it took most of the carry trade volumes.
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The rate cuts have mixed feelings, the government may see a recession coming ahead and has taken necessary action.
Turkeys financial regulator has been finalising FX legislation. Turkey has a thriving trading community built up over the last 20 years and retail FX has been growing. Leading brokers have set up shop as regulations were open. However as more and more clients started getting off the bad side of trades regulators caught on.
The SPK is expected to make a decision on the status of FX as an asset class on 25th August 2011 – Forexmagnates researches will be preparing a full report on the current regulatory changes and business opportunities in Turkeys huge FX markets.