Soaring inflation hammers Turkish lira; Indian rupee hits record low owing to high oil prices

Soaring inflation hammered Turkish bonds and the lira on Wednesday and India's rupee hit a fresh record low as high oil prices and a solid dollar kept the pressure on emerging markets.

The lira was firmly back above 6 to the dollar after data showed Turkish consumer prices surged nearly 25 per cent in September, hitting its highest in over a decade as a deepening currency crisis pushed up prices of everything from food to fuel.

The lira fell as much as 2.15 per cent against the dollar before paring losses to trade 0.9 per cent weaker.

"The key point to note here is that headline inflation is above the central bank's forecast. The central bank will need to react to this print. This is not something that could be ignored and they will have to hike at their next meeting," said Inan Demir, a senior emerging market economist at Nomura.

The central bank surprised investors by raising interest rates by 625 basis points last month, in efforts to support the lira that has fallen nearly 40 per cent against the dollar this year, hit by concerns about President Tayyip Erdogan's influence over monetary policy and a diplomatic rift with Washington over a detained U.S. pastor.

The lawyer for pastor Andrew Brunson said he filed an appeal to Turkey's constitutional court for his client's release from house arrest. The next court hearing on Brunson's case is on Oct. 12.

"We have a high-profile political event ahead of (the next central bank meeting), and if that is not resolved in a beneficial way, that means the central bank may have to react even earlier than at their next meeting," said Demir.

Investors were also restrained ahead of Friday's U.S. jobs data which could give more impetus for the Federal Reserve to raise interest rates this year and next, heaping more pressure on these currencies.

The Indian rupee hit a record low of 73.415 before recovering some ground after a report that the government was in talks with the central bank for a special dollar swap window with some state-run fuel retailers.

The Indonesian rupiah slipped to its weakest in two decades. Bank Indonesia flagged another possible rate hike to avoid "drastic capital reversals".

A recovery for the euro from six-week lows after a report that Italy was planning to trim its budget deficit in the coming years, bolstered Central European currencies.

Poland's zloty was 0.37 per cent firmer, leading the gains in the region, while Hungary's forint was 0.34 per cent stronger. Romania's leu and Croatia's crown also gained.

Stocks markets in emerging economies trod water, with Hong Kong and India holding back gains in the MSCI index for equities.

(With inputs from agencies.)