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Turkish lira rallies as central bank simplifies policy framework

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Turkish lira rallies as central bank simplifies policy framework

The Turkish lira rallied against the U.S. dollar on May 28 after the central bank set its one-week repo rate as the new benchmark, effective June 1, setting it at 16.5%, compared to 8% currently.

The lira was up 3.09% to $4.570 as of 5:58 a.m. ET.

The announcement completes the simplification of the Türkiye Cumhuriyet Merkez Bankasi AS' multi-rate monetary policy framework.

The central bank added that the overnight lending and borrowing rates will be set at 150 basis points above and below the one-week repo rate. That would move them to 18% and 15%, from 9.25% and 7.25% currently.

Last week, the lira reached all-time lows as higher U.S. dollar funding costs prompted investors to sell emerging-market currencies.

The Turkish central bank raised its late liquidity window interest rate to 16.5% from 13.5% on May 23, sending the currency whipsawing 2% higher after falling more than 5% earlier in the session.