Yen Slides for Third Session as Turkey’s Central Bank Surprises

The Japanese yen fell today for a third straight session as monetary tightening in emerging economies made riskier currencies attractive yet again. Yesterday’s surprise move of Turkey’s central bank added to the confidence of Forex traders.
Erdem Basci, Governor of the Central Bank of the Republic of Turkey, was talking about an was talking hike, so it was expected that the central bank would take an action. What was unexpected is the fact that the bank is going to act right now. Yet policy makers gathered yesterday at an emergency late-night meeting to change monetary policy.
Central bank member decided to raise all main interest rates. Moreover, the increases were huge. For example, the Marginal Funding Rate was boosted from 7.75 percent to 12 percent.
As with the Indian central bank, the main reason for increasing borrowing costs was high inflation. Turkey’s central bank said in the statement:

Tight monetary policy stance will be sustained until there is a significant improvement in the inflation outlook. Under this policy stance, inflation is expected to reach the 5 percent target by mid-2015.

The announcement spurred risk appetite on the Forex market and, consequently, hurt the yen, which is considered to be a safe currency. Traders felt that they simply do not need safety in the current environment.
USD/JPY rose from 102.92 to 103.12 as of 2:49 GMT today and touched the high of 103.43 intraday. EUR/JPY advanced from 140.70 to 140.87 and GBP/JPY ticked up from 170.63 to 170.97.

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