Bloomberg News

Lira Depreciates Most in Three Weeks; Bonds Advance on Rate Bets

September 02, 2011

Sept. 2 (Bloomberg) -- The lira depreciated the most in more than three weeks as traders bought dollars after Turkey’s currency climbed to a month high and a report showed U.S. hiring stagnated. Bonds rose as trading restarted after a holiday.

Turkey’s currency slipped 1.7 percent to 1.7519 per dollar at 5:40 p.m. in Istanbul, reversing this week’s gains to leave the currency less than 0.1 percent lower on the week. The lira appreciated to 1.7089 yesterday, the strongest in a month.

“Corporate clients who had postponed their foreign- exchange buying because of the holiday are buying now as they see the lira at a stronger level,” Baris Karaayvaz, a currency trader at Turkiye Garanti Bankasi AS, said by telephone. Foreign currencies were “oversold when locals were not around and people with long positions could not find buyers in a shallow market,” he said.

The lira fell to the lows of the day after a report showed hiring in the U.S. unexpectedly stagnated in August as employers became less confident in the strength of the recovery of the world’s largest economy.

Bonds gained, sending two-year yields to a seven-month low on speculation the central bank will cut rates to bolster the economy. The yield fell 17 basis points, or 0.17 percentage point, to 7.80 percent, the lowest closing level since Jan. 25, according to a Royal Bank of Scotland index.

Turkish business conditions worsened in August to the lowest level since April 2009, with the purchasing managers index declining to 48.8 from 52.3 in July, HSBC Holdings Plc said in a report today, citing data compiled by London-based Markit Economics. Any reading above 50 represents an expansion and below 50 a contraction.

“Unsurprisingly, Turkish bond markets were further ‘inspired’ by the manufacturing PMI print, assuming this builds into further rate easing,” said Tim Ash, the chief economist for emerging markets at Royal Bank of Scotland Group Plc in London.

Turkey’s central bank unexpectedly cut its benchmark interest rate to a record low of 5.75 percent on Aug. 4.

--Editors: Stephen Kirkland, Linda Shen

To contact the reporter on this story: Selcuk Gokoluk in Istanbul at sgokoluk@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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