The lira strengthened for a second day after the central bank refrained from lending at its lowest funding rate for a fifth day.
The Turkish currency appreciated 0.3 percent to 1.7917 per dollar at 5:06 p.m. in Istanbul, heading for the strongest level in almost two weeks. The yields on two-year benchmark debt were unchanged at 9.42 percent.
The Ankara-based central bank withheld funding at the lowest 5.75 percent rate in its daily one-week repo auctions after the lira weakened to a three-week low, 1.8177, on April 10. It lent 2 billion liras ($1.1 billion) in today’s auction, down from 3 billion liras due for repayment from last week’s repurchase agreements, at an annual rate of 10.51 percent.
“The bank maintains its policy of ‘exceptional days’ with determination and we expect the lira to trade strong today as a result,” Ali Cakiroglu, a strategist at HSBC Private Bank in Istanbul, said in an e-mailed note.
Turkey’s central bank varies its funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year. Days when the bank does not lend at the 5.75 percent rate are considered “exceptional days.” The current round of policy tightening began on April 11 after the lira weakened to a three-week low at 1.8177 per dollar during intraday trade.
The current-account deficit in Turkey is about 10 percent of gross domestic product, the biggest among 60 major economies tracked by the International Monetary Fund as a proportion of GDP. The country’s inflation rate is 10.4 percent, which is more than twice the bank’s 5 percent target for this year.
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