* Emerging market jitters may subside further after big rate
hikes in Turkey
* Turkish lira & Aussie dollar rally
* Yen down broadly as investors unwind safe-haven trades
By Ian Chua
SYDNEY, Jan 29 Japan's yen extended its pullback
early on Wednesday, while higher-risk currencies such as the
Australian dollar rallied after Turkey stunned markets with a
massive interest rate hike in an effort to stem capital flight
from its economy.
Turkey's central bank, hot on the heels of India, raised all
of its key interest rates - more than doubling some - in a move
that could help calm jitters over emerging markets in general.
The Turkish lira jumped to 2.1795 per U.S.
dollar from 2.2530 before the moves.
The Australian dollar, often used as a liquid proxy
for risk trades, rallied about 40 pips to $0.8813. It last
traded at $0.8797. Against the yen, the Aussie came within a
hair's breadth of 91.00 yen from 90.30.
The dollar and euro also firmed on the Japanese currency as
investors quickly unwound recent safe-haven flows. That saw the
greenback rise 0.3 percent to 103.27 yen, while the
common currency gained 0.2 percent to 140.95 yen.
"We believe that the CBRT - with its aggressive move - has
engineered a credible policy response," analysts at Societe
Generale wrote in a note to clients, referring to the Central
Bank of the Republic of Turkey.
"As a result, there is now scope for the Turkish lira to
stage a quick rebound, at least in the short term," it said.
Markets were already calming down after Friday's panic
selloff in some emerging markets assets which came amid
expectations the U.S. central bank will further scale back its
The Fed concludes its two-day policy meeting later on
Wednesday and is all but certain to reduce its bond purchases
for a second time, to $65 billion per month from $75 billion. It
is, however, likely to leave intact its vow to keep interest
This meeting is the last for Fed Chairman Ben Bernanke, who
will hand the reins to Vice Chair Janet Yellen.
The euro was little changed against the U.S. dollar at
$1.3654, having drifted lower in the last few days from a
high of $1.3740 last Friday.