Turkish bonds rose after the central bank governor Erdem Basci said the inflation rate may fall to 8 percent in May from 11.1 percent in the previous month.
The yield on benchmark two-year debt fell nine basis points, or 0.09 percentage point, to 9.51 percent by the close in Istanbul, erasing a rise in yields earlier in the week and ending the period unchanged.
Inflation is expected to slow to about 8 percent in May before accelerating again, Basci said in a speech in Istanbul today. The bank may change interest rates such that its monetary policy surprises investors and has an impact, he said. Inflation in April was the highest in 3 1/2 years.
“Today we have understood the inflation figure will be better than expected,” Murat Yardimci, head of trading at ING Bank AS in Istanbul, said in e-mailed comments. ING’s estimate for monthly inflation rate has been 0.9 percent, he said.
The Dollar Index, which measures the U.S. currency against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, strengthened by less than 0.1 percent to 81.387, a record 15 consecutive days of gains. The U.S. currency appreciated against the ruble and Asian currencies such as the South Korean won, Chinese yuan and the Indian rupee.
The lira depreciated for the sixth day in the longest streak of losses since November, lifting its weekly retreat to 2.7 percent, which is the biggest five-day slide since November. The currency fell as much as 0.8 percent before Basci’s comments and pared its loss to 0.2 percent at 1.8326 per dollar.
“The Turkish lira is not overvalued, on the contrary, it is slightly below where it should be,” Basci said. “Despite all the tightening measures, there is again a rise in loans in the second quarter; it is necessary for us policy makers to stick to tightening.”
German Chancellor Angela Merkel and fellow European leaders will face pressure from their G-8 counterparts to do more after speculation Greece will exit the euro wiped about $4 trillion from global stock markets this month as the summit starts today in the U.S.
“Greece and Eurozone are still very important concerns,” Yardimci said.
Moody’s Investors Service lowered debt ratings at 16 Spanish banks, while Fitch Ratings cut Greece’s credit rating on concern the country may not be able to sustain euro membership.
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