Bloomberg News

Lira Gains First Day in 4 on Tighter Policy, Key Threshold Level

May 10, 2012

The Turkish lira strengthened for the first time in four days as the currency approached a key resistance level against the dollar and the country’s central bank refrained from lending at its lowest policy rate.

The lira appreciated 0.6 percent to 1.7830 per dollar by 5:10 p.m. in Istanbul, the biggest gain since April 24 on a closing basis, paring its five-day loss to 1.1 percent.

The lira weakened as much as 1.7997 yesterday, piercing its 100-day moving-day average of 1.7987 as the euro depreciated for an eighth day after Greek politicians debated whether to accept or reject the bailout package. Crossing the moving average threshold and remaining above it is an indication the currency’s move may be sustained. The lira’s 200-day moving-day average is 1.8056 per dollar.

“Strong foreign exchange demand is needed for breaking these levels and, for this, there needs to be significant negative news in Europe,” Fatih Keresteci, a strategist at HSBC Bank AS in Istanbul, said in an e-mailed note.

The Turkish central bank refrained from lending at its 5.75 percent policy rate for a fifth day as it seeks to halve the country’s inflation rate running at a three-and-a-half year high by supporting the lira. The bank varies the funding rate on a daily basis, maintaining borrowing costs within a 5.75 percent to 11.5 percent interest-rate corridor introduced last year.

The yield on two-year benchmark debt fell first day in five, down 12 basis points, or 0.12 percentage point, to 9.45 percent, the biggest decline since March 30.

“Some players are expecting the central bank to resume lending at 5.75 percent tomorrow,” Murat Yardimci, head of trading at ING Bank AS in Istanbul, said in e-mailed comments.

The lira will probably weaken to 1.88 by the end of this year, the currency forwards show, while 22 global banks surveyed by Bloomberg see the currency stable at 1.78 in the same period.

The currency has gained 6 percent this year, the fifth-best performance among 25 emerging market currencies tracked by Bloomberg.

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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