Turkey’s lira is beating its peers in emerging markets after locals lost their appetite for foreign currency, Bloomberg reported.
The change in behavior has helped the lira buck the trend in the rest of emerging markets, gaining about 4 percent over the past month, the best performance globally, Bloomberg’s Constantine Courcoulas wrote on Wednesday.
Foreign currency holding of local investors have remained flat over the summer after rising by $35 billion in the nine months to early June, Bloomberg said. Turks are buying fewer dollars partly because of a slowdown in the economy, which has hit spending power.
Despite the rally, the lira is still at its cheapest since 2002, according to the currency’s real effective exchange rate, the news wire reported.
The path for lira gains has been cleared after Turkey’s reliance on external funding for its current account deficit reduced sharply and inflation slowed to 16.7 percent from a 15-year high of 25.2 percent last October.
Powerful base effects and the currency’s new-found stability should help inflation extend its decline, Bloomberg said.
U.S. investment bank Goldman Sachs expects inflation to slow into single digits in September or October, according to Bloomberg.