The Turkish lira got a nice bounce today after the Central Bank of Turkey announced that it will hold an emergency meeting tomorrow.

The expectations are that the central bank will announce a rate hike to stem the decline..

The currency has taken a beating on a corruption scandal threatening prime minister Tayyip Erdogan and the ruling AKP party.

“I think the central bank is desperate to stop the move lower, and realises the inadequacy of its current interventions,” Enis Taner macro editor at Risk Reversal and former trader at Goldman Sachs told Business Insider.

“My guess is that it will be an emergency rate hike, though if it’s not, and simply more talk rather than action, then the market could take it very badly. If they do hike rates a couple per cent on the upper band, then I think it will calm the currency in the near-term.”

Dennis Gartman, publisher of The Gartman Letter, writes that any bounce in the Lira will be temporary and that this will be an opportunity for “those long of the ‘Emergers’ to reduce their exposure.”

Turkey has of course in recent months seen a rise in political instability.

A corruption probe launched in December, which led to the resignation of key cabinet members and MPs from the ruling party, has raised investor concerns. But Turkey’s political sphere has been rocky since the demonstrations in Istanbul’s Gezi Park last year, which mushroomed into wider anti-government protests.

More than just politics

But it’s more than just these domestic political problems weighing on the Turkish lira. There is of course the country’s large current account deficit.

“The rise in U.S. rates after the suggestion of tapering in mid-2013 put pressure on the lira (and other EM currencies) since Turkish rates had fallen to such low levels in the years leading up,” Taner said. “Moreover, the large current account deficit in Turkey and the political problems reflected in the Gezi park protests added fuel to the move.”

But there’s also the fact that construction has helped drive Turkish economic growth over the past decade. But with higher interest rates, the yield on the 10-year is now above 11%, compared with 7.5% a year ago, financing construction projects and mortgages has increased, Taner pointed out.

Where does that leave investors?

It’s all about the time frame according to Enis who says he is optimistic on a 10-year time frame but is “quite cautious” in the next two years. He also expects a housing bust in the 12-24 months. That being said, “there will be significant opportunities for those waiting patiently to invest in Turkey in the next couple years.”

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