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Pound to Rand & Pound to Lira Exchange Rates Spike Following Central Bank Decisions

January 29, 2014 - Written by Frank Davies

The rout of emerging market currencies has continued during today’s session following shock interest rate hikes from Turkey and South Africa’s central banks over the past 24hrs.

The action from Turkey’s central bank was perhaps the most eye-catching – the Central Bank of Turkey made the shock announcement that it was raising its overnight lending rate from an already high 7.75% all the way up to a dizzying 12.0%. They also announced that they are increasing its overnight borrowing rate from 3.5% to a hefty 8.0%.

The Central Bank of Turkey’s action was aimed at stemming the sustained losses which the Lira has endured during recent sessions following disappointing data from China’s manufacturing sector last week. Fears that the US Federal Reserve may be set to rapidly slash its controversial Quantitative Easing programme have also held back the Lira since the turn of the year. We will learn more about the US central bank’s plans for asset purchase later today when the latest FOMC policy announcement takes place in the States. In the meantime, the market has reacted to the development in Turkey by scrambling to shift out of Lira-denominated assets sending the Pound Lira exchange rate (GBP/TRY) higher by well over 4.00% on the day a short time ago.

Elsewhere, the Reserve Bank of South Africa announced its own change of policy tack a short time ago, increasing interest rates from 5.0% up to 5.5%. Currency market participants reacted in a similar fashion towards the Rand as they had done against the Lira earlier on – they sold it off en masse. The upshot saw the GBP ZAR exchange rate shoot to 18.8060 at one point. The pair had been changing hands only a small amount above the 18.00 threshold earlier on.

At this stage, the tightening of policy by the South African Reserve Bank and the Central Bank of Turkey has in each case had the opposite effect to that which was desired. As investros’ frayed nerves calm in the medium term the Rand are Lira are likely to benefit as a result.

Important Pound Sterling, Rand & Lira Exchange Rates (As of: 15:30 GMT 29/01/2014)

The Pound Sterling to Turkish Lira exchange rate is trading up +3.34% at 3.74414 GBP/TRY.
The Pound Sterling to South African Rand exchange rate is trading up +2.49% at 18.58142 GBP/ZAR.
The Turkish Lira to Euro exchange rate is trading down -3.3% at 0.32385 TRY/EUR.
The Turkish Lira to Pound Sterling exchange rate is trading down -3.24% at 0.26708 TRY/GBP.
The Turkish Lira to South African Rand exchange rate is trading down -0.82% at 4.96280 TRY/ZAR.
The South African Rand to Euro exchange rate is trading down -2.5% at 0.06526 ZAR/EUR.
The South African Rand to Pound Sterling exchange rate is trading down -2.43% at 0.05382 ZAR/GBP.
The South African Rand to Turkish Lira exchange rate is trading up +0.83% at 0.20150 ZAR/TRY.
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