The Turkish lira rose nearly 2% on Friday to its highest level in a month before a meeting between Turkish President Recep Tayyip Erdoğan and his American counterpart scheduled for Monday. Traders said the meeting raised expectations of a thaw in cold diplomatic relations between Ankara and Washington.
The currency strengthened to 8.2865 against the dollar, its best since May 11, before falling to 8.34 at 0906 GMT. It also jumped 2% on Thursday and won five of six sessions after hitting a record low last week.
The pound lagged its emerging market peers for months.
But he has moved ahead of the pack ahead of the scheduled meeting between President Erdoğan and US President Joe Biden on the sidelines of the upcoming NATO summit. This will be their first meeting since Biden was elected last year.
Several disputes have strained relations, including Ankara’s purchase of Russian S-400 missiles which resulted in US sanctions which, in turn, weighed on Turkey’s currency and economy.
“In the short term, we can expect the Biden-Erdoğan meeting to continue to contribute positively to the Turkish lira and the BIST (stock index),” nlü & Co said in a client note.
Three traders told Reuters the market rise was in part driven by optimism that Biden and Erdoğan could lift the cloud of sanctions.
“Monday’s Biden meeting is critical… and the expectation of a positive outcome has translated into pricing, causing the lira to appreciate,” a Turkish Forex trader said.
The pound hit a historic intraday low of 8.88 last week.
It had fallen for three months due to inflation stuck at nearly 17% and little prospect of interest rate hikes.
Finance Minister Lütfi Elvan said on Friday that the fight against inflation “is a fight that must be won for the future of the country”.
Data showed rising expectations for year-end inflation, while separate data showed industrial production remained strong in April.