Analysts label Central Bank of Turkey's 'dovish' turn 'complacent', lira drops

Rate-setters in Ankara stopped holding out the possibility of further interest rate hikes, sending the Turkish lira sharply lower.

Their more 'dovish' policy stance echoed a similar change of tune from their peers in Canada, Japan and Sweden in just the last 24 hours.

It also came alongside some recent speculation in markets regarding the possibility of rate cuts in the States before the end of the year.

At its policy meeting on Thursday, the Central Bank of Turkey decided to keep all its main interest rates as they were, but removed the mention to "if needed, further monetary tightening will be delivered" from the statement accompanying the decision.

In response, as of 1250 BST the US dollar could be seen climbing 1.37% to 5.9538.

ANALYSTS SAY CBRT 'COMPLACENT'

"Given the upwards pressure on USDTRY in recent weeks, we think that the removal of this pledge shows a remarkable degree of complacency and/or naivety on behalf of the CBRT," said analysts at TD Securities.

"We maintain our bearish view on the lira and see USDTRY at 7.90 by end-Q2 and higher at 8.90 by end-Q3. We see the CBRT as being forced to hike further in the coming months, with a terminal WACF rate at around 30%."

As an aside, rate-setters at the Central Bank of Russia were set to meet to decide on rates the next day.