Turkeys lira fell to a sixmonth low on Thursday as risks of tighter U.S. monetary policy after strong inflation data weighed on most emerging market assets, with stocks set for their worst day since late March.
The lira fell around 0.8 to 8.4968 against the dollar, just a few points shy of its 8.5789 record low. The currency was likely subject to offshore selling on Thursday, given that Turkish markets were closed for a holiday.
Recent losses in the lira have brought the focus back to Turkeys shrinking foreign exchange reserves, as well as its central bank, which is hesitant to tighten policy even as inflation surges.
Data on Wednesday showed U.S. consumer prices increased the most in nearly 12 years in April, raising expectations that the U.S. Federal Reserve will tighten its monetary policy sooner than signalled.
The MSCIs index of emerging market currencies fell 0.2, its third day of declines, as the dollar advanced and yields on 10year Treasuries marked their biggest daily rise in two months.
The MSCIs index of emerging market stocks plunged 1.3 to a sevenweek low.
With yields moving higher and inflation expectations becoming increasingly unanchored from 2, expectations grew that the Fed might have to start normalizing monetary policy earlier than previously expected, said Marshall Gittler, Head of Investment Research at BDSwiss Holding.
Theres going to be a real struggle for control of the narrative between the Fed and the market for the next few months, added…