Bloomberg News

Rand to Lag Lira on Turkey Dollar Sales, Societe Generale Says

October 06, 2011

Oct. 6 (Bloomberg) -- The rand is poised to weaken against the lira as Turkey’s central bank sells more dollars to curb the currency’s drop and South Africa’s Reserve Bank refrains from stemming the rand’s decline, Societe General SA said.

Investors should sell the rand for the lira at 4.33 on anticipation the South African currency will weaken to 4.60, Guillaume Salomon, a London-based emerging-markets fixed-income and currency strategist, wrote in an e-mailed note today.

Turkish policy makers offered to sell as much as $1.35 billion for liras today, matching yesterday’s offer, the biggest since daily auctions started on Aug. 5. The lira sank 16 percent against the dollar this year, the second-worst performance among more than 20 emerging-market currencies after the rand’s 17 percent decline. South Africa’s central bank doesn’t target a level for the rand and won’t intervene to weaken or strengthen the exchange rate, Governor Gill Marcus said Sept. 22.

“The Turkish central bank has ‘re-engaged’ itself in a battle with the market to try and stem the lira’s depreciation and that it stands ready to use additional tools,” Salomon wrote. “Concerns about foreign bond holdings of rand- denominated bonds and a central bank generally happy with an orderly depreciation of the rand make the rand vulnerable, making a long lira-short rand an interesting offer.”

Investors who sell short hope to profit by borrowing assets, selling them and then repurchasing them at a lower price before returning them to the holder.

--With assistance from Krystof Chamonikolas in Prague. Editors: Peter Branton, Alan Purkiss

#<112284.4933480.2.1.95.14779.25># -0- Oct/06/2011 11:57 GMT

To contact the reporter on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

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


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