Bloomberg News

Turkish Lira Falls Third Day on Current Account Deficit Concern

November 17, 2011

Nov. 16 (Bloomberg) -- The lira weakened for a third day in Istanbul, crossing a 1.80 threshold against the dollar, on concern that policymakers will fail to contain a widening current-account deficit.

The lira fell 0.2 percent to 1.8023 per dollar at 9:45 a.m., heading for its lowest level since Oct 21. The currency lost 14 percent this year, performing worse than all other emerging market currencies after South Africa’s rand.

“In the current negative market environment, the market resumes its usual dislike of the lira, given the current account deficit issue and lack of simplicity in monetary policy to combat it,” said Roderick Ngotho, a currency strategist for the region at Royal Bank of Scotland Group Plc.

Turkey’s current-account deficit widened in September to $6.8 billion from $3.9 billion a year earlier, an expansion the central bank said had been brought under control as of last month. It widened from $4 billion a month earlier. The Ankara- based bank sold at least $8.7 billion for liras to shore up the currency and tightened liquidity in the market by forcing banks to borrow at overnight interest rates as high as 12.5 percent. The lira has rallied from a record low of 1.9096 per dollar reached on Oct 4.

“The central bank action on days of negative risk sentiment is unlikely to be so effective as the market is going the other way,” Ngotho said.

Yields were flat at 10.51 percent, a Turk Ekonomi Bankasi index of the securities showed, after advancing for two days. The index closed at the highest level since July 2009 yesterday.

--Editors: Peter Branton, Ash Kumar

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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