Bloomberg News

Turkish Lira Heads for 2-Week High as Bank Combats Depreciation

January 03, 2012

Jan. 2 (Bloomberg) -- Turkey’s lira headed for the strongest level in two weeks after the central bank sold dollars directly in the currency market for a second day.

The lira gained for a third day, adding 0.5 percent to 1.8823 per dollar at 2:44 p.m. in Istanbul. It dropped 18 percent last year, the biggest decline among emerging-market currencies tracked by Bloomberg.

The central bank said in an e-mailed statement that it was selling dollars in the market, following a similar intervention on Dec. 30 that it said was spurred by “unhealthy price formations.” The bank may have sold between $300 million and $500 million today, according to traders and strategists including Tufan Comert at Garanti Securities and Fatih Keresteci of HSBC Holdings Plc.

The lira fell to a record 1.9224 per dollar last week on concern that Turkey’s monetary policy will fail to contain a burgeoning current-account deficit and accelerating inflation. Inflation in December may be a “little above” 10 percent, the bank said in an e-mailed statement today.

The central bank has reduced funding to lenders at the benchmark interest rate of 5.75 percent for a “temporary period.” It may also use foreign exchange sales to support monetary tightening and cut benchmark funding even on days it classifies as “normal,” it said.

Yields on two-year benchmark debt rose 17 basis points, or 0.17 percentage points, to 11.20 percent.

--Editors: Ash Kumar, James Kraus, Ben Holland.

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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