Bloomberg News

Lira Heads for Longest Winning Streak in a Month; Bonds Gain

June 06, 2012

The lira strengthened for a fourth day, the longest winning streak since May 1, after policy makers in leading economies said they will collaborate to respond to Europe’s crisis, bolstering demand for riskier assets.

The lira advanced 0.4 percent to 1.8388 per dollar at 4:43 p.m. in Istanbul. Yields on two-year benchmark bonds fell three basis points, or 0.03 percentage point, to 9.20 percent, extending the lowest level since March.

Group of Seven officials will work together to help Spain and Greece place public finances on a sustainable footing, Japanese Finance Minister Jun Azumi told reporters yesterday after a conference call between finance ministers and central bank governors of the G-7. European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens. Atlanta Federal Reserve President Dennis Lockhart said that extending the central bank’s Operation Twist stimulus program is an “option on the table.”

“All risky assets are having a good ride at the moment,” Esther Law, the London-based director of emerging-markets strategy at Societe Generale SA, said by phone. “Turkish investors in general are just moving in line with global risk appetite.”

Emerging-market stocks rose, driving a benchmark index to a second day of gains. The ECB today left its benchmark interest rate at 1 percent as the debt crisis tightens its grip on the euro-area economy, increasing pressure on policy makers to deliver further stimulus. Draghi said that the euro region economy faces “increased downside risks.”

Bonds advanced as investors bet the Turkish central bank’s pledge to defend the lira will slow inflation, Law said.

“This feeds through to the bond market, particularly the long end, as defending the currency is good for inflation,” Law said. “People see the central bank’s active defense as a reassurance especially given the uncertainty we still have ahead in terms of growth and the euro zone.”

To contact the reporter on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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