Lira Volatility Hides Ongoing Strength

April 2006 | Economic Analysis

After several months of relatively stable, lira volatility returned with a vengeance in March. Indeed, after breaking through the key TRY1.3/US$ level in mid-February - which suggested ongoing investor confidence - it fell markedly in early-March and remains volatile. However, while there are good reasons to believe that emerging market assets will gradually come under pressure in 2006, the underlying strengths of the Turkish economy should support the lira. Consequently, while there will be a rough ride, a sharp sell off is unlikely.

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