Bloomberg News

Lira Strengthens Most in Two Weeks on Bets Sell-Off Is Overdone

March 15, 2012

The lira headed for its biggest gain in more than two weeks as technical indicators suggested the currency may have depreciated too far and too fast.

The Turkish currency appreciated 0.6 percent to 1.7970 per dollar as of 5:53 p.m. in Istanbul, the most since Feb. 28. It weakened 1 percent yesterday and retreated 2.5 percent from its strongest level this year reached on Feb. 20.

A stochastic oscillator for the lira versus the dollar was 82.9 today, above the 70 threshold that signals the currency may have depreciated too fast and is poised for a rebound. The measure, which tracks the price of a security relative to its highs and lows during a particular period, climbed above 80 two days ago for the first time since Jan. 6.

“We are seeing today a correction in yesterday’s big move but the overall sentiment in the market is that the dollar will keep its strength,” Emir Baruh, a currency trader at Akbank, said in e-mailed comments.

The lira plunged as much as 1 percent yesterday to 2.09 against an equally weighted dollar and euro basket following the Federal Reserve’s decision to raise its assessment of the U.S. economy on March 13 and acknowledge strains in global financial markets have eased. Fed policy makers refrained from new actions to lower borrowing costs, saying the U.S. labor market is gathering strength. Relative to the basket, the lira rose 0.4 percent to 2.0751.

The Turkish currency has weakened 2.9 percent this month performing worse than all emerging markets after the Brazilian real and reduced its gains this year to 5 percent.

Yields (BENCH) on the two-year benchmark debt fell five basis points, or 0.05 percentage point, to 9.37 percent, according to a Turk Ekonomi Bankasi AS (TEBNK) index of the securities.

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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