Bloomberg News

Lira Weakens First Time in Four Days on Greek Debt Deal Talks

January 31, 2012

Jan. 30 (Bloomberg) -- The lira weakened for the first time in four days as investors avoided risky assets before a gathering of European leaders to secure a deal over the Greek debt writeoff.

The Turkish currency declined 0.9 percent to 1.7927 per dollar as of 5:03 p.m. in Istanbul. A close at this level will be the biggest depreciation since Dec. 28, according to data compiled by Bloomberg.

“People are taking positions against the chance of a disagreement over Greece,” Emre Balkeser, head of trading at Garanti Investment in Istanbul, said in e-mailed comments.

European Union leaders gathered for their first summit of 2012 as a deteriorating economy and struggle to complete a Greek debt writeoff risk delaying efforts to stamp out the financial crisis. Greece and its private creditors said Jan. 28 they expect to complete a deal in coming days after bondholders signaled they would accept European government demands for a bigger cut in their debt holdings.

Turkey’s current-account deficit is still elevated and inflation will remain high through the first half of 2011, Ahmet Akarli, an analyst at Goldman Sachs Group Inc. in London, said in a client note.

The deficit fell in November for the first time in two years, bringing the cumulative 12-month total to $77.8 billion, still equivalent to about 10 percent of gross domestic product. Inflation ended last year at 10.5 percent in December, twice the central bank’s target and the highest in three years.

Lira Drops

“We continue to see significant fundamental depreciation pressure on the lira, and believe that the paying pressure on local rates may intensify once again,” Akarli said.

Turkey’s lira dropped 18 percent last year in the biggest decline among emerging markets. The yields on two-year debt soared 390 basis points in 2011, the most since 2006 on concern the country’s current-account deficit and the European debt crisis will hurt investor confidence.

Yields on the benchmark two-year debt declined for a third day, down 13 basis points, or 0.13 percentage point, to 9.47 percent, a Turk Ekonomi Bankasi AS index showed. A close at this level will be the lowest since Oct. 24.

--Editors: Ash Kumar, 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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