Turkey roast

23 March 2021 By Ed Cropley Follow @edwardcropley

A steep plunge in the lira, of the sort seen this week after Turkey’s president fired his central bank boss, usually drags down the rand. Not this time. The South African currency’s resilience shows the value of a credible and independent central bank left free to control prices.

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South Africa’s rand strengthened slightly against the dollar on March 22, bucking a broad-based slide in emerging-market currencies that was sparked by the sacking of Turkey’s central bank governor and a slump in the Turkish lira.

The lira plunged as much as 15% against the dollar after Turkish President Tayyip Erdogan on March 20 unexpectedly dismissed Naci Agbal. Agbal had two days earlier raised a key interest rate by 200 basis points, more than economists had expected, to 19% to tackle inflation.

The lira’s losses weighed on other emerging markets, with Mexico’s peso and Brazil’s real down almost 1% each against the U.S. currency on March 22. However, the rand appreciated 0.1% to 14.71 against the dollar.

South Africa’s Monetary Policy Committee is due to meet on March 25. Economists expect it to maintain its benchmark interest rate at 3.5%, after the inflation rate fell in January to 3.2%.

Context News

South Africa’s Monetary Policy Committee is due to meet on March 25. Economists expect it to maintain its benchmark interest rate at 3.5%, after the inflation rate fell in January to 3.2%.

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