Bloomberg News

Lira Weakens to 2-Week Low as Europe Crisis Overcomes Macro Data

December 12, 2011

Dec. 12 (Bloomberg) -- The lira depreciated to a two-week low as concern Europe’s debt crisis is damping growth and comments from the central bank on inflation outweighed optimism from Turkey’s better-than-expected macroeconomic data.

The lira weakened 1.2 percent to 1.8652 per dollar as of 5:52 p.m. in Istanbul, declining to the lowest level since Nov. 28 and pushing this year’s declines to 17.3 percent. Yields on the two-year benchmark debt rose nine basis points, or 0.09 percentage point, to 10.40 percent, a Royal Bank of Scotland index of the securities showed, the index’s highest level since Nov. 29.

Turkey’s current-account deficit widened from a year earlier in October, expanding less than economists’ forecast. The shortfall grew to $4.2 billion from $3.4 billion, the central bank in Ankara said in a statement on its website today. The median estimate from eight economists surveyed by Bloomberg was of $4.6 billion. The economy grew 8.2 percent in the third quarter from 5.3 percent a year earlier, the statistics office said on its website today in Ankara, beating the 6.3 percent median estimate of nine economists surveyed by Bloomberg.

Stocks fell and the euro weakened as Moody’s Investors Service said it will review ratings for countries in the region and Intel Corp. cut its fourth-quarter revenue forecast. Italian bonds stayed lower after a debt sale, while commodities slid.

“Turkey-specific data was good but the global markets started the day with sales and this is driving us lower too,” Emir Baruh, a currency trader at Akbank TAS in Istanbul, said in an e-mail.

Turkish central bank governor Erdem Basci said the bank is now focused on inflation. The central bank acted early to tackle an increase in the inflation rate, he said in televised comments to reporters in London today after a meeting with economists. Turkey may further tighten monetary policy, depending on how inflation develops, Basci said and added the bank may conduct open market operations.

“The message I got from Basci is that inflation will be in double-digit levels in the first quarter of 2012,” Murat Yardimci, chief trader at ING Bank AS in Istanbul, said in e- mailed comments. goods.

Inflation in Turkey rose to 9.5 percent in November from 7.7 percent a month earlier, the statistics office in Ankara said Dec.5. The median estimate of eight economists surveyed by Bloomberg was 9 percent. The central bank’s preferred measure of core inflation jumped to 8.2 percent, the highest since June 2007.

Basci raised the reserve requirements for banks after he took over as governor in April. In October, he doubled the rate at which banks borrow from the central bank to as high as 12.5 percent. He has kept the benchmark one-week repo rate at a historic low of 5.75 percent, saying Europe’s debt problems threatened Turkey’s economic growth.

--Editors: Ash Kumar, Peter Branton

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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