The lira headed for the biggest loss in six months after the Turkish central bank’s surprise decision to ease policy, offering funding at its lowest rate.
The lira depreciated 1.5 percent to 1.8114 per dollar at 5:29 p.m., on course for the biggest decline since Nov. 21, curbing this year’s gains to 4.4 percent.
The central bank offered and sold in the one-week repo auction 4 billion liras ($2.2 billion) at its lowest annual lending rate for the first time since May 3, the longest streak of tightening since the period between Dec. 29 and Jan. 9. It 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 rationality behind this decision does not become accessible to me,” Felix Herrmann, an analyst at DZ Bank AG in Frankfurt, said in e-mailed comments. “Especially in an environment like this where EM currencies get under pressure massively and against the backdrop of high inflation in Turkey this decision is kind of dangerous.”
The lira pierced its 200-day moving-day average of 1.8059, a key level for technical analysts. Crossing the moving average threshold and remaining above it is an indication the currency’s move may be sustained.
Global stocks fell, commodities declined to their cheapest level this year and the euro weakened to a four-month low on concern Greece would exit the single European currency and after German Chancellor Angela Merkel’s party lost a state election.
“The reason why the central bank resumed normal days is that the lira gained against other emerging-market currencies last week,” Ali Ihsan Gelberi, head of research at Turkiye Garanti Bankasi AS (GARAN) in Istanbul, said in e-mailed comments, referring to how days where central bank does not lend at the 5.75 percent rate are termed “exceptional days.”
The lira strengthened 2.1 percent against the South African rand, 1.9 percent versus the Polish zloty, 1 percent against Mexican peso and the Hungarian forint over the past five days, data compiled by Bloomberg showed.
“The bank cares about the gap with other emerging markets” more than the depreciation against the dollar, Gelberi said.
The yield on two-year benchmark debt increased for a second day, up five basis points, or 0.05 percentage point, to 9.56 percent.
The Stoxx Europe 600 Index lost 2.3 percent to 246.22 at 3:13 p.m. in London. All 19 industry groups on the gauge fell. The MSCI Emerging Markets Index dropped 1.2 percent to 958.75 as of 12:34 p.m. in London, the lowest since Jan. 17.
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