Bloomberg News

Lira Gains Most Since March 2009 After Bank Said to Sell Dollars

January 02, 2012

Dec. 30 (Bloomberg) -- The lira strengthened the most in almost three years on a report by Bloomberg HT television that Turkey’s central bank sold dollars for liras in the currency market.

The lira surged as much as 3.1 percent to 1.8575 per dollar, the biggest increase since March 2009, and gained 2 percent to 1.8786 at 2:13 p.m. in Istanbul. The bank may have sold between $700 million and $1.5 billion in the direct sale, according to two traders who spoke by telephone on the condition of anonymity because they aren’t allowed to speak to the media on such matters.

“The rate of the lira against the dollar had fallen to as much as 1.92 very rapidly and the central bank sees that as a risk for inflation and said that it doesn’t like that kind of volatility,” Hakan Aklar, an economist for Ak Invest in Istanbul, said by telephone. “It’s year-end, the market is not deep, and it may have spotted some speculative action.”

The lira reached 1.9224 per dollar on Dec. 28, an historic low and taking its decline this year to almost 20 percent, the worst performance among emerging market currencies tracked by Bloomberg. The weaker currency will add as much as 4 percentage points to inflation this year, driving the rate to almost double the bank’s year-end goal of 5.5 percent, governor Erdem Basci said on Dec. 27.

The direct sales of dollars by the central bank are continuing and may have reached $1.75 billion, Bloomberg HT said.

Auction

The central bank also sold $750 million in a daily auction of dollars for liras today, getting $920 million of bids, the bank said. The central bank will announce the size of any direct sale of dollars for liras in the currency markets within 15 days, according to a policy announced this week.

Turkey’s foreign-exchange reserves declined to $82.8 billion as of Dec. 23, equivalent to about five months of imports. The reserves fell from a peak of $93.9 billion on July 7, according to data from the central bank published yesterday.

Yields on two-year lira bonds rose 6 basis points to 11.04 percent, according to a Royal Bank of Scotland Group Plc index of the securities.

--With assistance from Steve Bryant in Ankara. Editors: Mark Bentley, Ercan Ersoy

To contact the reporter on this story: Aydan Eksin in Istanbul at aeksin@bloomberg.net

To contact the editor responsible for this story: Aydan Eksin at aeksin@bloomberg.net


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