Bloomberg News

Lira Strengthens to Six-Month High on Foreign Investor Demand

January 16, 2012

Jan. 16 (Bloomberg) -- The lira rallied to a six-month high against the euro amid speculation Turkey’s currency will strengthen further as investors seek higher-yielding assets.

The Turkish currency advanced 0.5 percent to 2.3484 against the euro at 4:35 p.m. in Istanbul, the biggest one-day gain among 25 emerging-market currencies tracked by Bloomberg. That took the lira to its highest level since July. The lira rose 0.4 percent versus the dollar to 1.8538.

The lira may appreciate to a fair value of 2.20 per euro, Deutsche Bank AG said in a report Jan. 12, citing an “attractive” carry trade and “solid state finances.” Turkey’s estimated total return is 4.9 percent by the second quarter of 2012, the highest rate among developing nations, according to data compiled by Bloomberg.

“We see investors based abroad continue to sell euros versus the lira, there is demand for high-yielding currencies,” Emir Baruh, a currency trader at Akbank TAS in Istanbul, said in e-mailed comments.

The yield on Turkey’s 10-year bonds is 9.5 percent, the second-highest in eastern Europe after Hungary, data compiled by Bloomberg shows. That compares with 1.8 percent for the euro area and 1.9 percent in the U.S, the data show.

Turkey’s budget deficit narrowed to about 1.4 percent of gross domestic product last year, the smallest gap since 2006, from 3.6 percent in 2010, Finance Minister Mehmet Simsek said today at a news conference.

The lira broke its 200-day moving average versus the euro on Jan. 6 and has traded stronger than its 50- and 100-day moving averages for the past month. The 200-day moving average was 2.40 today, according to data compiled by Bloomberg.

Automatically traded portfolios sent selling euro orders after the lira broke the 200-day average, Baruh said.

The Turkish central bank didn’t sell dollars today at its daily auctions because of a U.S. holiday. The bank has sold at least $15 billion since August to shore up the lira, which dropped 18 percent last year in the biggest depreciation among emerging-market currencies.

--Editors: Stephen Kirkland, Linda Shen

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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