Hedge funds and investors lured by high interest rates, but flows could leave country vulnerable to a shift in sentiment
Hedge funds and other traders have pumped billions of dollars into the Turkish lira in recent months as they chase juicy returns, but the rush of “fast money” has also left the country more vulnerable to sudden swings in sentiment, say investors and analysts. Money managers have since October poured around $24bn into trades that seek to profit from Turkey’s high interest rates — currently 50 per cent — according to Istanbul-based Bürümcekçi Research and Consultancy.
Moody’s Investors Service on Friday awarded Turkey a rare two-notch upgrade to its junk-level credit rating to B1, citing the “increasingly well-established return to orthodox monetary policy”. The head of a large emerging markets hedge fund that has allocated a substantial amount to carry trades added that he “liked Turkey” right now. “ recognises inflation has to be controlled,” he said, adding that “Turkish savers fled to dollars but now they are coming back.
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