YOUR PORTFOLIO Real / lira the pound in 2022 . It also boosted the performance of UK investors in the MSCI Brazil index , who were up 28.5 % last year while investors in the local currency made 8.2 %. However , Simpson says 2023 should be a more challenging year for the real . “ The Brazilian central bank has stopped raising rates , whereas the Bank of England is expected to continue hiking ,” he says . “ Moreover , some of the economic policies of the incoming Lula administration have been more unorthodox than expected , which may put some shortterm pressure on the real .”
Turkish lira
At the other end of the scale is the Turkish lira , which has been subjected to monetary policy that can at best be described as “ unorthodox ”. “ Turkey ’ s central bank has been hijacked by president Recep Tayyip Erdoğan , who has a unique theory that inflation is caused by high interest rates ,” explains Dimmich . “ Much like Trussonomics put UK fiscal policy on its head by flooding the economy with borrowed money when inflation was high , Turkey has cut interest rates in the face of inflation . This has caused inflation to reach more than 80 %, resulting in the currency dropping to balance out nominal growth in the economy .” Unsurprisingly , the lira fell by about 20 % against the pound in 2022 . However , with the Turkish stock market representing the only hope for locals to protect their savings from inflation , it saw a surge in domestic inflows , pushing up valuations . This meant the MSCI Turkey index made 114.4 % for UK investors last year , even after the fall in the lira . But don ’ t expect a repeat of this performance . Analysts at Schroders said : “ The market ’ s trajectory seems unsustainable . We have become outright negative in our outlook .”
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