U.S. Federal Reserve optimism has pumped a much-needed impetus for the Turkish Lira against the dollar, putting an end to a one-week tumble of the currency and relieving pressure from the current crisis in Iraq.

The lira/dollar ratio, which approached 2.15 on the night of June 18, rapidly dropped down to 2.12 over the night after the Federal Reserve delivered a broadly upbeat outlook on the U.S. economy and suggested interest rates would remain low for some time.
Turkish stocks also reacted to the Fed’s statements positively by opening the day with a 1.41 percent rise at 79,197 points.

Both the lira and stocks kept their strong pace during morning trading, as the lira traded at 2.13 while the Borsa Istanbul 100 Index hovered around 79,235 points at 11:40 a.m.

After a closely watched meeting, the Fed’s policy committee said it would slash a further $10 billion off its monthly bond purchases and maintain its “highly accommodative” monetary policy of record low interest rates.

Bank policymakers said in a statement that economic growth “has rebounded in recent months” from early first-quarter contraction, while household spending and business investment were both rising.

Although that had been expected, there was no mention of an earlier hike in interest rates, which is expected to come in mid-2015. There had been speculation that a recent run of upbeat economic data – including rising inflation – would prompt the bank to consider bringing forward its timetable.

Federal Reserve boss chairman Janet Yellen told reporters there is “no mechanical formula” for when the Fed will lift benchmark rates following the end of the stimulus.

Analysts also noted the Central Bank did not significantly increase its inflation forecast, “suggesting the recent pick-up in inflation doesn’t materially change its near-term outlook for monetary policy,” said a note from IHS.

The decision also demonstrated the Federal Reserve’s faith in the economy despite cutting this year’s growth forecast from 2.1 to 2.3 percent, sharply down from its March prediction of 2.8 to 3.0 percent before the depth of the winter setback was known.



Source Hurriyet

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