LONDON : Turkey's lira gained yesterday, supported by the possibility of an aggressive interest rate hike, while other emerging currencies and stocks rose on growing expectations that more developing countries would tighten policy. The benchmark MSCI emerging equity index rose 0.5 percent, after falling for three consecutive days. The Turkish lira rose almost 1 percent to trade about 7 percent above Monday's record lows, thanks to expectations that Turkey's central bank would raise its benchmark rates during its meeting last night. It is expected to raise rates by À basis points to 10 percent, according to a Reuters poll of analysts. Expectations are growing that more emerging central banks will tighten monetary policy after India unexpectedly raised its repo rate yesterday by 25 basis points to counter inflation. "The trigger for stability is emerging central bank action. If Turkey does something, it will help," said Sebastien Barbe , the head of emerging market strategy at Credit Agricole in Paris . Brazil , South Africa and Indonesia - part of what has been dubbed the Fragile Five - may follow suit. Like most analysts, Barbe does not expect any action from the SA Reserve Bank when it meets later this week. But Tradition Analytics said that failure to increase rates would leave South Africa's assets more exposed. "The rand and bonds will be increasingly exposed to the current offshore dump of emerging market assets without an adequate interest rate buffer," it said. - Reuters Cape Argus
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