Lira on shaky ground, Russia dropping capital controls

The Turkish lira remained under pressure this week and the raft of policy measures announced on Thursday show that officials are doing whatever they can to avoid interest rate hikes. Capital controls are likely in the event of sharp and disorderly falls in the lira. In contrast, capital controls continued to be rolled back in Russia this week and it seems that policymakers are trying to fight back against the strength of the ruble. But a marked weakening of the currency seems unlikely so long as the current account surplus remains large. Elsewhere, strong inflation and activity data out of Central Europe suggest that further monetary tightening is on the cards.