Dollar/Turkish lira reaches another record high as gains continue

The dollar continued its record-setting climb against the Turkish lira, trading at 48.2970 at 9:50 a.m. after ending the previous session at 48.2850, up 0.1% from the prior close.

The euro slipped 0.1% against the lira to 55.9490, while sterling traded almost unchanged at 65.2660. The dollar index was also broadly flat at 99.7.

Growing fears that tensions in West Asia could spread across the region have strengthened inflation concerns in global markets. Selling pressure in bond markets has kept yields elevated and increased volatility in asset prices.

Expectations for a Federal Reserve rate increase this month have shifted sharply. The probability stood around 30% last week but moved close to 70% this week. The yield on the U.S. 10-year Treasury note reached 4.82%, its highest level in about three years, while the dollar index remained near 100 and close to a two-week high.

Federal Reserve Board member Michael Barr said inflation had remained high for more than five years. He said policymakers could take a little more time to assess their stance if incoming data provided confidence that inflation was moving toward the 2% target. But if inflation had not slowed enough, he said the Fed should act decisively on a rate increase.

Analysts said the domestic data calendar was quiet in Turkey. Investors were watching U.S. weekly mortgage applications, ADP private-sector employment, factory orders and durable-goods orders, as well as the Federal Reserve’s Beige Book report.

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If we see that inflation has not slowed sufficiently, we need to act decisively on a rate increase.